GMP reconciliation should be higher on trustee agendas
Monday, September 16, 2013
Pension schemes are under-estimating the issue of Guaranteed Minimum Pension (GMP) reconciliation and trustees need to put the issue higher up their agendas, a consultant has warned.
According to Aon Hewitt's Benefits Administration Survey 2013, only 6% of respondents said that GMP reconciliation was among their priority projects for the next 12 months.
The consultant said that even though trustees are distracted by other demands, such as auto-enrolment, they need to form a strategy to deal with what can be a lengthy, complex and costly process.
GMP reconciliation is the comparison of membership and GMP figures between administrator and HMRC records and if GMP is recorded inaccurately, then this means that pension payments may have been incorrect.
The process uncovers underpayments and overpayments and is notorious for being complex.
In 2009 the National Audit Office discovered that five public sector schemes had overpaid pensions by over £90m due to GMP errors.
Regarding the low number of trustees who placed GMP reconciliation as a priority project, Aon Hewitt's commercial director for benefits administration Colin Hamilton said: "They may well – quite understandably – be distracted by the demands of, for example, auto-enrolment or changes to benefit design.
"But GMP reconciliations are linked to a number of other industry-wide developments which affect schemes, notably the abolition of defined benefit (DB) contracting out in 2016, the Pensions Regulator's push for clean data and GMP equalisation.
"Some of our clients are recognising that this is an issue which needs to be dealt with and many more will be doing so in the near future."
In response to the issue, Aon Hewitt has formed a partnership with specialist consulting firm GMP Managed to form a dedicated GMP reconciliation solutions team to help schemes for a strategy.
Aon Hewitt is also developing materials to guide trustees through the process and to help make key decisions easier to understand.
First published 16.09.2013
monique_simpson@wilmington.co.uk
