Scheme membership data at the heart of good trustee governance

08-Jul-2007

John Broker of Independent Transition Management (ITM) considers the issue of data for trustees in light of the Pension Regulator's Guidance Note on Internal Controls

It’s been an interesting time in the pensions world with more and more emphasis on trustee governance, risk management, a drive for better quality administration and ultimately, higher levels of control and member security. The Raising Standards in Pension Administration initiative has promoted these concepts for a long time. Now, the Pensions Regulator has issued specific guidance on Internal Controls and the Institute of Chartered Accountants has issued guidance notes on internal controls for service organisations (AAF 01/06).     

Regulatory Code of Practice number 9 sets out the Regulator’s expectations of how trustees should satisfy the legal requirement to have adequate internal controls in place. The Code provides trustees and their scheme managers with a high level risk based approach which can be followed when assessing the adequacy of internal controls, enabling trustees to focus on and manage key risks.

Whether a pension scheme is administered internally or by a third party, membership data is a critical focus area for trustees and scheme Managers. The importance of data cannot be underestimated. In the many years that I have been involved with pension administration, poor data has always been an issue which I believe has hindered the progress of the industry generally.

How many actuarial valuations have to be qualified because data is missing or incomplete? How accurate then, can the valuation and the quantification of the employer’s financial commitment be in these situations? How many trustees would like to better promote the merits of their scheme, offering members far more choice and interactivity through the internet? But they cannot because data quality is too poor! Ultimately of course, poor data means that a member’s pension benefit might quite simply be wrong or a pensioner is being paid incorrectly.

We can all speculate on this but it is a fact that there is significant room for improvement in data quality which would lead to higher standards and controls for all.

So, what should trustees and scheme managers do about this? In considering the Regulator’s Guidance note when establishing a robust governance and risk management process, trustees and scheme managers have a very timely opportunity to incorporate an independent annual data analysis, combined with either a one off data cleansing exercise or, an agreed programme focussing on cleaning the data in stages, according to criticality. Even in instances where data is considered to be good, a robust governance programme should include an annual data review with independent certification, providing trustees with assurance that this critical area of scheme management has and will continue to be reviewed regularly.

Good data is at the heart of good trustee governance and is the key enabler for higher levels of internal control, scheme management, more accurate and wider ranging services for scheme members.     


John Broker ITM 
Director, ITM Ltd