So what red hot pensions topic have I chosen to write about for my first blog? The answer: TPR's recent recommendation that a tolerance level of £2 should be adopted when schemes reconcile their Guarantee Minimum Pension records with those of the National Insurance to Pensions Industry (NISPI). I fear a rather ignominious start to my blogging career....

When a scheme is wound-up, or assessed for entry into the Pension Protection Fund (PPF), it is necessary to reconcile the pension scheme's records with those of NISPI. Inevitably, there will be a number of queries.

It is the Pension Regulator's (TPR) suggestion that scheme's consider a £2 per week tolerance level, which has caught people's attention. But why should you care about it?

Well, the first issue concerns the GMP reconciliation process itself and the second is what we may expect from TPR in the future.

So why £2? Why not £1 or indeed 10p? Analysis by NISPI has revealed that 44% of differences in GMP amounts are below £2 per week.

Some specialists in GMP reconciliation exercises have noted that TPR's suggestion is not entirely helpful as when scheme records are good it is possible to reconcile GMPs automatically so that figures match. However, the key phrase to note is 'when records are good'. Unfortunately, we do not live in the ideal pensions world (where Steve Webb in a toga sits under an olive tree and dispenses wisdom to acolytes at his feet).

Given analysis by NISPI has shown that where the GMP amount has been queried, the HMRC figure has been accepted as being correct 91% of the time. This would appear to be an overwhelming argument for not arguing with HMRC and indeed the tolerance could be set even higher! 

But let's not get hung up on the figure of £2. The Regulator's bigger message is to encourage a 'pragmatic and proportionate approach' that enables scheme wind-ups to occur within two years. The aim is to avoid expensive GMP reconciliations that will deplete the available funds. This is certainly an ambition that we support.

TPRs announcement may give some clues as to future guidance. The PPF has been frustrated by poor scheme records that have meant some data and benefit audits have been long  and costly. TPR has said that schemes should give consideration to regular member tracing and data cleansing exercises so that if the scheme faces wind-up delays are avoided.  

So what might we expect in the future? Well, how about suggestions that schemes look at the following:

- Reviewing whether the scheme has actually equalised retirement ages – in my experience only a small number of schemes that have entered the PPF have equalised correctly.

- Checking that there is certainty over the benefits promised by the scheme – are you sure the rules say what you think they say?

- Sending data verification certificates to members to give them the opportunity to question the scheme's records.

Well, that was fun, wasn't it?  See you next time!

Richard Bryant, head of Trustee Services  – Atkin Trustees Ltd