GMP Reconciliation final HMRC listings – The holy grail or the epic fail?
In my last blog published on 9 March 2020 I described the work Trustees might want to undertake once the HMRC final listings were issued (these are the ones the industry has been waiting for, for around 18 months).
Since I wrote there has been some good news, the listings have finally started coming through at pace. However, we have uncovered several issues with these final listings. My blog today explores what we have uncovered, the response from HMRC and the steps Trustees might want to take next.
The holy grail?
To date we have received listings for 35 schemes. There are plenty more still to arrive but this was good news and it meant that some of our clients could now start to plan for the next phases, GMP rectification (GMPr) and GMP equalisation (GMPe), knowing they finally had the HMRC rubber stamp of approval they had been patiently awaiting…
The big hope was that the final listings would validate all the hard work that the industry (and HMRC) had undertaken over the preceding 6 years or so - a final confirmation of the GMP amounts and membership numbers agreed between all parties. That was the big hope.
The epic fail?
What we have actually received from HMRC has left us disappointed. We have uncovered a multitude of errors:
- GMPs that previously matched no longer matching,
- inconsistencies between the live HMRC GMP checker service and the final listing,
- GMPs that agreed during the reconciliation phase but now disagree because a transferred in GMP element is missing in the final listing.
- GMPs being calculated at dates that do not match what had been previously been reconciled (which means additional work now has to be undertaken to check that they still match).
On top of all of this we have uncovered multiple membership discrepancies (many more than expected – one Scheme had over 250 new members appear on the final listing). There are several other errors which are a bit too technical to go into here but overall this has left us with the conclusion that, frankly, the final HMRC listings are unusable for validating previously reconciled GMPs.
If you have new members appearing on your final listings there is currently no way of challenging these with HMRC. Trustees will therefore need to go through another round of deciding whether their records are more accurate than HMRCs. This could involve investigative work by the scheme administrator (to check that these individuals definitely are not in the scheme) and legal advice on the decisions being made.
Some of these queries have been raised with HMRC and their response has left little in the way of reassurance.
HMRC response
HMRC responded to the queries submitted to them (by us and others in the industry) by saying “Differences between your final data cut and GMP Checker output can occur as GMP data provided in your final data cut is a ‘lift’ of GMP held at a point in time, whereas the online GMP Checker service provides a real time GMP amount calculated at the point of request. The online GMP Checker will always show the most recent and accurate calculation”. My interpretation of that is that we should not be using the final listing for anything other than checking and agreeing scheme memberships. As mentioned above even that task may not be as straightforward as hoped. What a mess, particularly as we have all been waiting so long for these listings to arrive.
So what next?
HMRC have said that when you receive your final data cuts, in the first instance they advise that you check the GMP amounts provided against your own records. My firm advice is not to do that, to instead just use the online GMP checker service to validate the GMPs you have already agreed (remembering of course that there will be differences where you agreed to disagree with HMRC – keep your own scheme listing up to date – I can’t emphasise that enough). If you can’t agree the GMP output from the online checker this can be queried with HMRC at a life event.
If you are in a position where you are transacting with an insurer you should make them aware that the final listings from HMRC are inaccurate and should not be used to validate GMPs now or at any time in the future. Instead get agreement with them that your own scheme listing is the accurate one.
Avoid unnecessary work
If you follow my 5 steps below you will avoid unnecessary pain and work and can move on to your GMPr and GMPe exercises:
- Validate your previously agreed GMPs using the online GMP Checker service;
- Use the final HMRC listing to agree your membership and, if different, speak to the scheme’s administrators to investigate if the HMRC records are accurate;
- Seek legal advice and use the Pensions Administration Standards Association (PASA) guidance if the intention is to do something different to what is shown on the HMRC listing;
- Finalise your own scheme listing with your agreed GMPs and membership; and
- Update your administration systems with the new GMP for all deferred (and maybe pensioners under GMP Age) now.
If you follow these 5 simple steps you will be in a great position to move on to your GMP pensioner rectification and GMP equalisation projects.