There are lots of projects competing for trustees’ time these days and it’s both tempting and understandable to put the trickier ones further down the list.
But given GMP reconciliation work should have been completed months – even years – ago, why are trustees so hesitant to commence GMP rectification (“GMPr”) when they know they are holding data or paying benefits they know to be wrong?
Here are some of the reasons I have heard from others throughout the industry:
- We still haven’t fully completed our reconciliation project and don’t have a complete picture of who requires rectification.
- We are doing GMPr alongside our GMP equalisation (“GMPe”) project as it will be easier communicating to those members where you have to make an adjustment for both GMPr and again for GMPe.
- We have a lot of data cleansing work to undertake before we commence.
These could all be valid reasons, but I believe that most have just not grasped the importance in fixing these issues and – crucially - the impact their non action is having. This work can be done in an efficient and pragmatic way now.
I have been through many GMPr projects and thought it would be useful to share the biggest lessons learned so far:
- 1. Complete your GMP reconciliation! I know it’s never going to be the most urgent task on your to do list but it needs to be done. You cannot complete GMPr or GMPe until this element is complete, and it is incredible that some Schemes are still in this position.
- 2. Decide whether GMPr and GMPe will be completed together or separately. To help with that decision I suggest reading the ‘When to rectify’ guidance released by PASA, that I helped put together, and then do the following:
- Undertake a data gap analysis – Do you have all the data you need to undertake the projects? What data cleansing needs to be undertaken? Will it be easier to do the projects separately or together because of data issues?
- Analyse your membership – How many members, split by status, that are in scope for rectification are also in scope for any GMPe? This is particularly important in respect of pensioners and forthcoming retirements because this could affect the amount of pension they receive. Are there any quick wins, like rectifying non-pensioners before they retire?
- Consider how long each project will take – Are you in a position to get on with both projects together? How long will they take if completed separately or together? If you are in a position to get on with both, great. If not, is it right that members identified as having an incorrect GMP in the reconciliation phase have to wait for you to make progress on GMPe before they receive their corrected benefit?
- Get your communications right – Good, clear communications are so important. Communicating anything in relation to GMP is going to be problematic, more so when you have to explain why you are adjusting a pension due to an historical mismatch of records between the Scheme and HMRC! Communicating once to members is clearly easier, but Trustees should not necessarily be put off communicating twice (even if adjustments are going in opposite directions!) GMPr and GMPe can be done separately so long as you get your communications right.
- 3. Importantly make sure that you document all of your decisions giving the reasons why you have chosen the route you have.
If you follow my advice above and follow these three key steps, then you should have some comfort that the direction your GMP project is taking is right for you and your members.
Don’t kick the can down the road: remember the longer you take to fix your known errors the bigger your issues will become!