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    GMP Reconciliations – a great big ‘rip-off’ or value for money?

    By Dennis Mincher on Thursday, October 22, 2015

    On average there is a substantial amount of dedicated time and effort required to complete a GMP reconciliation exercise, it being one of the most laborious projects undertaken for any scheme. Often there are extensive mismatches between administrator and HMRC records which need to be rectified before the project can be signed off, so for schemes with large member numbers this is a lengthy  (and therefore costly) process, with timeframes usually measured in years. It is hence somewhat surprising to see views published recently that edge towards a ‘rip-off’ attitude to GMP reconciliations, I have to wholeheartedly disagree.

    The end result of the task bears more fruit than solely rectifying contracted-out membership and amounts. With the corresponding data cleansing that occurs during the reconciliation process comes a guarantee of more accurate scheme data, having a knock on effect to various expenses involved with the running of the scheme. Some examples of such are listed below:

    • The Pensions Regulator’s ongoing requirement regarding the condition of scheme data is aided by the reconciliation process, helping with the efficiency of the scheme administration.
    • Actuarial valuations and annual reports will be completed using more accurate and complete data, cutting the normally unavoidable task of data manipulation every time a valuation comes along. The end result is a more cost effective valuation, but more importantly, accurate results.
    • In accordance, trustees and employers are more assured that unnecessary financial demands that may have been put forward from a more inexact report won’t occur.
    • Probably most important of all is that the accuracy of member benefits is at less risk.

    Costs will invariably differ from scheme to scheme, depending on size and the amount of discrepancies between administrator records and the records of HMRC. The fact is, that due to the cessation of contracting-out in April 2016, and the consequential impending closure of HMRC’s dedicated Scheme Reconciliation Service (SRS) in December 2018, outstanding GMP reconciliation projects need completed. Given the timescales (as alluded to earlier) of such projects, work should already be well underway.

    The key message is to shop around for the right pricing model to ensure potential costs don’t escalate out of control. As with any project undertaking, it is prudent to price check and get comparative quotes before commencement. Alongside this, an understanding of the scheme’s data quality is also important before budgets are put into place.

    Veratta has developed a unique and bespoke illustrative pricing model for costings of a contracted-out reconciliation project for any scheme type, taking into account both membership numbers and the scheme’s data quality – therefore indicating the amount of investigation required. This makes it possible to review the potential expenditure on the project before any work commences, reducing the risk of ‘hidden fees’ which may crop up once the project is underway.

    So are GMP reconciliations really a great big ‘rip-off’ or value for money? There is no question that the process is vital to a scheme’s (and therefore its members) financial wellbeing, it is choosing the right way forward that will decide.

    If you require the completion of a GMP reconciliation try our pricing calculator here or get in contact with our team on 0289 041 2888.

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