Why pension schemes must act to correct poor data

It is stating the obvious to say poor data affects not only benefit administration, but actuarial funding calculations and therefore the whole strategy for managing your scheme.

Data is a problem for the industry and administrators and schemes need to work together to sort it out

If you have flawed data, you have a flawed pensions strategy.

While engagement by schemes in the mandatory testing of their common data was relatively high, the regulator must be disappointed at the relatively low level of engagement in terms of measuring a scheme’s conditional data.

Conditional data are much more important in terms of efficiently administering a scheme.

The survey indicates less than 60 per cent of schemes had tested these data and less than a quarter of these had a conditional data score of more than 90 per cent.

Most trustees will not even have a process that allows them to identify clearly what conditional data items they need to hold. Just under half of smaller schemes are unlikely to carry out regular reviews.

Data are dynamic and can get better or deteriorate over time, and schemes need to be able to monitor the quality of data on an ongoing basis.

There is no reason why an administration system should not provide a daily measure of data and allow trends to be managed as an integrated part of the administration.

Improving data governance

We need to get away from the notion that a data audit is a complex special exercise and accept that this is a fundamental piece of management information that should be readily available to trustees.

It is also important to note that data audits tend to measure the presence or absence of data, with limited analysis of their quality.

You could get a tick if you hold an address for a member, regardless of whether or not that address is correct.

A simple data audit cannot tell you the benefit details you hold for a particular member are correct.

The point at which a scheme switches advisers is an opportunity to address this issue, but too often there is no budget for it and poor data are passed from one administrator to the next.

Administrators have shied away from having an open and honest conversation with their trustees about data quality, for fear of being seen as part of the problem rather than the solution.

This needs to change. The data gap is a problem for the industry and administrators and schemes need to work together to sort it out.

Neil Copeland is a director at consultancy Spence & Partners