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Keep it clean!
Amersham's Chris Potts examines how pension schemes can improve administration using some basic spring cleaning.
Good record-keeping is at the heart of efficient pension scheme administration. Without this, Trustees struggle to make informed decisions and give good service to their members. Needless to say, inefficiency also adds financial strain to the fund and the employer.
We often hear the term "clean data" used by Trustees and administrators but interpretation of this phrase varies and might appear difficult to define. Put simply, clean data is accurate, up-to-date, complete and clear. Other influences, such as the Data Protection Act 1998, put pressures on data quality and control.
A set of basic consistency checks will quickly establish any problem areas in your data. These are sometimes simple to rectify and can be prevented from future recurrence by modifying administration processes and updating associated documentation.
Other errors or deficiencies can be more difficult to repair. For example, deep-rooted problems may have arisen from data inherited from legacy computer systems or previous administrators, possibly as a result of scheme restructuring or bulk transfers in. Time spent addressing such areas is invariably well spent.
More advanced checks can be performed on historic benefit calculations. A typical question might be "Can the preserved pension held on a member's record be relied upon to form the basis of a later retirement calculation?". Further detailed questions need to be asked to answer this question fully, but some basic data checks can be performed to assess the overall answer without having to look at each member individually.
A pro-active approach to maintaining clean data has large rewards when data is under close scrutiny, which it will be when issuing benefit statements, during actuarial valuations, and when introducing new computer systems or changing administrators.
The increasing popularity of member access to information can be a worrying proposition to scheme Trustees if the integrity of the underlying data is uncertain.
Ongoing savings and benefits are also seen during day-to-day administration, when calculating and settling members' benefits and other routine processes. For example, good quality data increases the scope for automation of calculations and letter production.
In summary, improved quality of records improves accuracy and efficiency. Added confidence in the records used by the scheme Trustees, actuaries, auditors, administrators and other related parties will improve the image of your scheme and take some of the headaches out of pension scheme administration.
Chris Potts, May 2002.