The proverbial Lord Mayor’s show is over; the end of contracting-out has finally come and gone. So what now? Well, schemes with changed benefit design may be cancelling their contracting-out certificate and this means they will have to adopt a different approach to GMP reconciliation.
"SRS turnaround times for HMRC to respond to your queries are expected to be between two and three months."
You have started your reconciliation project, haven’t you?
Assuming the answer is yes, you have probably been using the Scheme Reconciliation Service (SRS). This allows you to resolve discrepancies in bulk with HMRC; using query templates. SRS turnaround times for HMRC to respond to your queries are expected to be between two and three months and there is no limit to how many queries can be in progress at any one time.
What happens when I cancel my contracting-out certificate?
When schemes change so they no longer meet historical contracting-out requirements, e.g. benefits wouldn’t satisfy the Reference Scheme Test or there are no active members , they will need to cancel their contracting-out certificate. This seems odd considering there is no longer anything to contract-out of, but it remains an important legislative requirement.
National Insurance Services to the Pensions Industry (NISPI) in Nottingham receive notification and update the scheme’s record. They will then inform the National Insurance Contributions Office (NICO) in Newcastle who are responsible for tracking GMPs. This information can take up to three months to travel up the M1 and A1.
While the information makes its way north, schemes should continue to progress SRS queries; because NICO will update individual national insurance accounts as they consider queries.
Once NICO know the certificate has been cancelled they will stop SRS activity and the scheme will be referred to Shared Workspace (SWS). Because HMRC update member accounts as they go along, when you switch from SRS to SWS progress made via SRS will be captured and form the starting position for SWS.
"When you switch from SRS to SWS progress made via SRS will be captured. "
Remind me again what Shared Workspace is…
SWS is an electronic data room where two sets of data can be compared and messages exchanged between the administrator and HMRC. It is different from SRS in that all queries have to be addressed individually. But, this doesn’t have to be a bad thing.
There is a one-off opportunity to capture any final 'quick wins' before your discrepancies are crystallised on SWS; schemes should have fewer queries to contemplate due to recent SRS activity.
If your administration system is flexible enough, there should be little impact on your reconciliation project. In fact, with fewer queries to resolve and shorter response times from HMRC, you may get to the end quicker.
Don’t be scared of surrendering your contracting-out certificate, but do think carefully about your timing; get it right and you can benefit from the greater level of detail gained from SWS use.