WIND UP MYTH BUSTERS SERIES
Myth 2: My data is good quality and buy-out ready…
15 Jul 2021
Buying out all scheme liabilities and winding up the scheme is often the hardest job a board of trustees will ever be faced with. We hear a number of wind up myths and rumours flying around, from trustees, pension managers, companies and even consultants who specialise in other areas! In this series, we aim to bust those myths and promote a better understanding of the journey to wind up a scheme. Here, we continue with:
Myth 2: “My scheme data is of good quality, it’s ready for buy-out”
A trustee’s overarching role is to ensure the right benefits are paid to the right people at the right time, but how do you make sure that’s the case on buy-out?
On buy-out trustees hand over a data schedule and benefits specification to the insurer and the scheme then ceases to exist. Therefore, it is the trustees’ absolute last chance to ensure that all data and benefits on record are completely correct. Often trustees may assume that their data is in good shape but in our experience that’s not always the case. This can lead to surprises late in the day, or delays in the buy-out and wind up while issues are resolved.
How do I get my data buy-out ready?
Data audit - carry out a full data audit, or ‘health check’ well in advance to get a realistic picture of data quality. From this, any necessary improvement actions can be identified and planned out – helping to control costs as well as avoiding unexpected issues cropping up further down the line.
Sample checking - review a sample of members’ benefits from first principles in order to check for any systematic issues. The more complex the benefits or scheme structure, and the more times admin services have changed hands, the more potential scope there is for errors to creep in.
Confirm data held - trustees may wish to write to members asking them to confirm their personal data and benefits in order to flush out any other issues.
Collect any missing data - for example, spouses’ pensions and marital status information. Spouse pensions are typically only calculated when an individual member dies and up to date marital status information may not be held. When buying out this information needs to be collected and electronic records need to be updated with accurate spouse pension amounts. This exercise often takes up a high proportion of the time and cost spent on data cleansing.
Still confident in your data?
Data cleansing needn’t be a worry. Taking a proactive approach to reviewing your records will pay dividends – planning out the tasks and cleansing data early on will help ensure a smooth transition to buy-out and ultimate wind up.
If you’d like to talk further about data audit, or wind up more generally, please get in touch with one of us!