The government is recouping £2.7m in overpayments to civil service pensioners, but experts warn issues with administration, data and technology continue to impact members and businesses across the industry.
More than 2,000 members of the Civil Service Pension Scheme have been asked to hand back overpayments, with the largest single overpayment totalling £34,000, Pensions Expert’s sister publication FTAdviser reported earlier this week.
The figures were revealed by Matt Thurstan, chief executive of MyCSP and current administrator of the scheme, in a letter to Conservative MP Sir Bernard Jenkin, chairman of the Public Administration and Constitutional Affairs Committee.
The letter addressed administration issues stemming from the lack of timely provision of accurate data by the employer and the processes followed by the administrator to ensure any corrections were picked up and applied correctly.
Mr Thurstan explained the errors occurred after employers made changes to the data used to calculate pension entitlements that were not considered by the pension scheme.
He wrote: “For some cases, these changes have resulted in a reduction to the member’s pension, giving rise to an overpayment.”
He pointed out that both the administrator and the scheme were “very conscious of the impact that overpayments can have on members”, and so if members can provide evidence of financial hardship it could lead to their debt being written off in “extreme cases” in line with the Treasury’s managing public money guidelines.
This follows on from the government clawing back overpaid pensions from civil servants back in June, after an audit of the public sector pension scheme’s former administrators encountered errors.
The degree of complexity surrounding current and past pensions legislation is hampering the industry’s ability to improve and become more member-focused or, dare we say, even member-friendly
Peter Sparshott, PwC
Industry still not getting basics right
Unfortunately, such issues are unlikely to be limited to just this scheme, according to Ian Browne, pensions expert at Quilter.
“Defined benefit schemes tend to rely heavily on old data, which may not be recorded digitally,” he explained.
The industry is still wrestling with the complexity of DB scheme rules and, in some instances, outsourcing administration to cut down on costs has come at the price of quality, Mr Browne said.
“However, defined contribution schemes don’t tend to have the same problem as they are simpler, more modern and easier to administer,” he added.
Despite a renewed focus from the Pensions Regulator on record-keeping, there is still some way to go before the state of administration could be considered efficient and focused on delivering a good service to members, according to Peter Sparshott, pensions partner at PwC.
He said: “The industry is still not getting the basics right. The degree of complexity surrounding current and past pensions legislation is hampering the industry’s ability to improve and become more member-focused or, dare we say, even member-friendly.”
But the fundamental challenges facing the industry are still “the lack of focus on systematically improving data, enhancing overall system capability and functionality, and delivering compliant processes”, he explained.
How to improve the quality of historic data
The regulator’s ongoing focus on record-keeping is welcome, and if it continues to expand this to include administration delivery and how it impacts on members, then the industry will respond, although not quickly, according to Mr Sparshott.
This is where technology can help provide administrators and schemes with the ability to provide better engagement.
He said: “However, for this technology to increase member experience and engagement, it is critical that administrators bring their systems up to scratch, otherwise this could prove a missed opportunity for the industry.”
Aside from the effective use of technology, there are simple measures schemes can take to improve data.
For example, staff dealing with data relied on for pension calculations should be appropriately trained, which will help maintain a consistent level of data quality and protect against a large data clean-up bill that no one will want to pay, according to Susan Sinclair, senior administration consultant at Hymans Robertson.
She pointed out that issues around the quality of historic data are nothing new, so trustees and employers must understand their responsibility to provide correct data to the administrator.
“We see the key issues as relating to historical data, largely as a result of processes and data being inadequate to meet future requirements, or changes in administrators leading to transfers between administration systems,” Ms Sinclair said.
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Mr Browne also suggested that data-cleansing exercises could be mandated by the regulator.
Ms Sinclair added: “There is an increased focus on data quality driven by a number of factors, including increasing interest from the regulator, an interest in risk-reduction exercises, a move towards access to information online, and the prospect of a pensions dashboard.
“Guaranteed minimum pension equalisation is likely to concentrate the minds of many schemes on the issue of data quality over the next year or two.”
