Comment
Benefits of good record keeping
In the opinion of the Pensions Regulator, good record keeping has potential to lead to less expensive administration, less complaints from disgruntled members, lower costs on winding up, increased confidence in the data used for actuarial valuations and potentially lower indemnity insurance premiums.
The Pensions Regulator has also confirmed that there is evidence of problems with record keeping. ‘Legacy data’ (the historical records held on file or inherited) is found to cause the most problems though current data also, including data in respect of special benefits following scheme mergers and rule changes, might not be as accurate or complete as it should be.
Avoiding administration errors
The responsibility to administer the trust lies with the trustees. Delegation to agents or advisers does not reduce the trustees’ individual or corporate liabilities. When errors and omissions occur, trustees have no option but to make good any loss of benefit, particularly where financial harm is proven.
The only way to reduce the number of errors occurring is to regularly monitor the calculation of benefits paid, test manual and computer systems, and reinforce the accountability of third parties.
Trustees should enquire about the computer systems employed by the administrator and the way financial transactions are approved and signed off by administration staff. It pays to have an understanding of the monetary signing levels of administrative staff; also to know that someone is responsible for checking the accuracy of benefit quotations before they are issued. Visits by trustees to administration departments assist enormously in this regard.
Cheque fraud is increasing. This section also gives tips and actions on how trustees can take steps to reduce the risk of their scheme suffering cheque fraud.
Data Protection Act 1998
The Data Protection Act 1998 requires all organisations to have appropriate security measures in place to protect personal information against unlawful or unauthorised use or disclosure and accidental loss, destruction or damage. Trustees are ultimately responsible for the protection of their scheme data, whether or not they use third parties for some elements of running their scheme.
The Information Commissioner has powers to order organisations to pay a penalty up to £500,000 for serious breaches of the Act. Trustees should nominate and appoint a ‘data protection compliance officer’. The compliance officer would be expected to monitor the scheme’s compliance with the eight data protection principles of the Data Protection Act 1998. When appointed, new advisers, managers, etc., should be asked to confirm that they will be compliant with the trustees’ data protection principles. [10.10.5 contains a suggested compliance checklist for consideration] |