Dennis Mincher explains it's important to shop around to get the best deal for your scheme.
On average there is a substantial amount of dedicated time and effort required to complete a GMP reconciliation exercise. It is one of the most laborious projects undertaken for any scheme.
Often there are extensive mismatches between administrator and HMRC records which need to be rectified before the project can be signed off, so for schemes with large member numbers this is a lengthy (and therefore costly) process, with timeframes usually measured in years.
So, it is somewhat surprising to see some people feeling that carrying out a GMP reconciliation is a 'rip-off'.
The end result of the task bears more fruit than solely rectifying contracted-out membership and amounts.
With the corresponding data cleansing that occurs during the reconciliation process comes a guarantee of more accurate scheme data, which has a knock on effect to various expenses involved with the running of the scheme. Some examples of such are listed below:
• The Pensions Regulator's ongoing requirement regarding the condition of scheme data is aided by the reconciliation process, helping with the efficiency of the scheme administration.
• Actuarial valuations and annual reports will be completed using more accurate and complete data, cutting the normally unavoidable task of data manipulation every time a valuation comes along. The end result is a more cost effective valuation, but more importantly, accurate results.
• In accordance, trustees and employers are more assured that unnecessary financial demands that may arise from a more inexact report will not occur.
• Probably most important of all, is that the accuracy of member benefits will come with a stronger guarantee.
Costs will differ from scheme to scheme, depending on size and the amount of discrepancies between administrator records and the records held by HMRC.
The fact is, that due to the cessation of contracting-out in April 2016, and the consequential impending closure of HMRC's dedicated Scheme Reconciliation Service (SRS) in December 2018, outstanding GMP reconciliation projects need to be completed.
Given the timescales (alluded to earlier) of such projects, work should already be well underway.
The key is to shop around for the right pricing model, to ensure costs do not escalate out of control.
As with any project undertaking, it is prudent to price check and get comparative quotes before commencement.
Ideally an illustrative model (giving indicative figures) for a reconciliation should be available from the offset, taking into account both membership numbers and scheme data quality – therefore indicating the amount of investigation required.
This makes it possible to review the potential expenditure on the project before any work commences, reducing the risk of 'hidden fees' which may crop up further down the line.
So are GMP reconciliations really a great big 'rip-off' or value for money?
There is no question that the process is vital to a scheme's (and therefore its members) financial wellbeing, it is choosing the right way forward that will answer this question.
Written by Dennis Mincher, Business Analyst, Veratta.
