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    Pension scheme data audit - making it all worthwhile

    By Tom Nimmo on Thursday, December 15, 2016

    Does your pension scheme have accurate, automated benefit calculations? Does your pension scheme have a functioning member portal? Are your pension scheme administration processes as efficient as they could be?

    In order to get a good handle on the response to all of these questions, a pension scheme data audit is a vital. In fact multiple pension scheme data audits are required to really push through positive change. I will not go into detail about the work involved in pension scheme data audits here, as that subject merits a separate blog. However, for those who see the prospect of multiple data audits to be a painful, onerous exercise, I will say here that they needn’t be. Instead, this blog will focus purely on the potential benefits of such exercises and how good quality pension scheme data pays for itself.

    If my last blog on pension scheme record keeping was ‘the stick’ then this blog can be considered ‘the carrot’. There are two main ways that pension scheme data audits can be used by pension scheme trustees and their service providers, which can lead to a range of benefits.

    Data Audits for Challenging Scheme Advisers

    Pension scheme trustees will undoubtedly want to ensure that the service delivered by their pension scheme administrators is high quality and value for money. There is a strong argument for trustees to require that their pension scheme records are reviewed periodically by an independent pension scheme data auditor. In this instance, data audits have the benefit of allowing trustees to challenge the service being delivered by their pension scheme administrators. Objective, independent assessments such as this can be a powerful tool for trustees, which can result in service improvements and cost savings to the pension scheme.

    Data Audits for Improving Processes

    Ongoing administration of pension schemes and a wide range of recurring and stand alone projects can be affected by poor quality pension scheme data. Activity specific, conditional data audits can be a valuable resource in the completion of large scale projects involving scheme administration data. Popular targets for conditional data audits include assessments of the data required for use in scheme funding valuations, ongoing administration benefit calculations and more recently, contracted-out reconciliation exercises. With activities such as these, an initial data audit can act as a benchmark, enabling trustees and administrators to gain a better understanding of the potential barriers or complications that data issues might create. Subsequent data audits can enable the progress of data rectification efforts or bulk data exercises to be measured, helping to ensure that the pension scheme’s data quality standards never degrade.

    The Benefits of Pension Scheme Data Audits

    Good record-keeping standards are required to achieve excellent levels of service and cost and pension scheme data audits are an integral part of that process. By using data audits in the ways mentioned above, a wide range of benefits can be achieved, including:

    •    Fully automated benefit calculations and document production.

    •    Feature-rich member portals with straight-through processing of administration requests.

    •    Improved bulk buy-out and buy-in rates from annuity providers.

    •    Reduced costs and greater accuracy in actuarial valuations.

    •    Reduced risk and greater automation of bulk data exercises such a contracted-out reconciliations and GMP equalisation projects.

    •    Better integration of data between the pension scheme administration database and other systems such as pensioner payroll and pension fund accounting.

    With so much potential value to be unlocked, it is crucial that pension scheme data audits are completed to a consistently high standard and properly support the strategic goals of the pension scheme. In my final blog of this series, I will examine what pension scheme trustees should be looking for in the completion of a pension scheme data audit exercise.

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