Trustees and pensions administrators warned that they need to take action on Guaranteed Minimum Pension (GMP) reconciliation now. Trustees and their advisers have just a few months left to register with HMRC to use HMRC’s Scheme Reconciliation Service (SRS). Warns ITM. a specialist data management provider.
The SRS gives schemes the opportunity to reconcile their contracted out membership and GMP data against that held by HMRC. When the deadline for GMP reconciliation was first announced, an estimated 20 million scheme members potentially had GMP records to reconcile. However, as of September, over a third of schemes had yet to express an interest in HMRC’s reconciliation service. Schemes that fail to prepare for these changes will face significant administrative challenges and, in particular, those that fail to register for SRS before April 2016 will be unable to reconcile their data with HMRC. A failure to reconcile data may lead to schemes having extra liabilities they are unprepared for, loss of reputation amongst members and uncertainty around data in future buyouts or transfer value exercise, leading to possible higher costs.
From April 6th 2016, schemes will no longer be able to contract-out their defined benefit pensions. HMRC will supply GMP figures for members who are contracted out on that date in a one off exercise late 2016/ early 2017 and therefore reconciliation exercises should include these members too. Guy Ridley, ITM’s managing director, said: “The fact that firms will no longer be able to contract-out the State Second Pension represents the biggest administrative challenge for UK pensions in many years. Tight budgets and limited resources mean that the labour and resource-heavy process of GMP reconciliation will distract pension professionals from their core responsibilities once the option of contracting-out is abolished.
“This issue can no longer be ignored. It is essential that scheme managers inform HMRC of their interest in the Scheme Reconciliation Service as soon as possible and prepare themselves for the administrative burden of reconciliation now. By doing so, pension administrators will be able to pay the correct benefits to their members and avoid the financial implications of having unreconciled data.”
ITM launched its automated reconciliation service last year to help ease the burden on in-house or third-party administrators in areas such as the analysis of underpaid and overpaid pensions and the re-calculation of pension splits. With this assistance, the company aims to significantly reduce the time, effort and cost of GMP reconciliation.
