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Bespoke approach to pension in payment tolerances for GMP reconciliation
Hickson UK Group Pension Scheme appointed Barnett Waddingham in 2005 to provide a flexible and high quality pension administration service for their members who have a variety of complex needs and requirements.
We work collaboratively with the trustees and the scheme on a day-to-day basis, and ahead of the abolition of contracting-out from April 2016, we started a Guaranteed Minimum Pension (GMP) reconciliation exercise. Working in partnership with the trustees we were able to easily update them on timescales and budgets as well as providing them with the facts in order to make informed decisions.
We were able to effectively meet the needs of the trustees who had asked that work be carried out as efficiently as possible in light of limited resources and also with minimum impact on members’ benefits that any reconciliation or rectification exercises might cause.
Early on in the reconciliation process, we identified a group of members receiving GMP increases above the statutory minimum which would inflate GMP benefits recorded for them in the scheme – creating ‘false’ discrepancies compared with Her Majesty’s Revenue and Customs’ (HMRC) data. Having highlighted these members and quantified the average inflated GMP amounts using Penstream (our in-house administration system), we recommended a revised (increased) tolerance within which GMP amounts would not be queried with HMRC.
Penstream accurately models GMP and non-GMP increases from early retirement date to State Pension Age (SPA) for multiple members. The flexibility gained by the use of our Penstream pension administration system increased reporting speed and enabled us to quickly bring the solution to the trustees’ attention. Based on Microsoft software, Penstream provides a full range of IT solutions covering all aspects of pension administration, including day to day administration, record keeping, pensioner payroll, benefit calculations and processing of Defined Contribution (DC), Defined Benefit (DB) and Career Average Revalued Earnings (CARE) pension data. We use Cashstream for all cash handling and accounting which is fully integrated with the Penstream platform.
By applying our extensive GMP reconciliation experience and being proactive in approaching this project, we identified a large number of members that could be treated as a discrete group in a different way to the remainder of the members.
In addition we enabled the trustees to demonstrate accelerated progress with their project and also to focus their resources on members where records showed genuine discrepancies that needed to be investigated. Considering the scheme as a whole, rather just as an exercise at hand ensured that we were able to provide an exemplary and fully comprehensive service with the best possible outcome for trustees and members.
We are truly confident in our partnership approach to GMP reconciliation, which has clearly benefitted Hickson UK Group Pension Scheme and has ensured that we adopt this approach for clients so that they too can benefit from collaborative working early in their reconciliation process.
"Barnett Waddingham first approached us about a GMP Reconciliation project as part of our regular administration reports. Subsequently they have been proactive in requesting SRS data on our behalf and in providing statistics and other information in regular reports to help us make sensible decisions on how to progress with the project. This includes having slightly different approaches for different categories of members because of different non-statutory GMP increases which has helped us focus our resources in areas where GMP differences could impact on our members."
