Data management in a pandemic –
balancing the strategic and the tactical
As I write this, for many pension scheme trustees and administrators, progressing with projects is on hold as we all adapt to new ways of working as a result of COVID-19 and the need to focus on prioritising the payment of benefits to members
and their families.
However, at some point in the not too distant future, the spotlight will again be on the management of pension scheme data, providing an opportunity to regroup and reprioritise the approach to improving the existence and quality of the data we hold.
The number and type of potential data-related projects means that, increasingly, administrators are being asked to prepare a data strategy which is aligned to the objectives and roadmap for a scheme. Having a data strategy helps to ensure that maximum value and therefore return on investment is achieved from any data analysis and cleanse activity.
The data strategy will include some elements that apply to all schemes, but much will be specific to individual scheme objectives. Agreeing these activities will help with the prioritisation of projects and highlight any dependencies. As a minimum, the roadmap should include compliance with legislative and regulatory requirements, projects focused on compliance with scheme rules, service improvement initiatives and individual scheme objectives and strategy.
In terms of priority, projects related to legislative compliance are likely to fall into the ‘must do’ category, so the roadmap should cover common and scheme specific data, Defined Contribution (DC) governance requirements and, whilst not strictly compliance ,should probably also include Guaranteed Minimum Pension (GMP) reconciliation, rectification and equalisation, and there should also be a placeholder to keep a watching brief on the data requirements for pension dashboard and, in relation to GMP equalisation, the outcome of the second Lloyds hearing which is focussing on past transfers out. Having placeholders on a roadmap can be helpful to ensure any data requirements arising from these are integrated into a data strategy at the earliest possible opportunity.
The other form of compliance that will likely feature on the ‘must do’ list is compliance with scheme rules. This might include known issues with past calculation of benefits which need to be rectified. If so, an impact analysis needs to be completed to understand the scope of the work, including capturing the data needed to complete the rectification exercise. With all types of rectification exercises it is important to not only consider the data that needs to be extracted from the administration system but also the format of any data to be loaded back, for example the form of the rectified benefits.
We know that the Pensions Regulator (TPR) is focussed on the existence and quality of the data items needed to properly administer a pension scheme but TPR has also highlighted the important role that administrators have in keeping data safe. Trustees should ensure they understand their cyber security risks and the steps being taken to minimise these. This should be an item on the risk register and trustees should be asking their scheme administrator about the controls in place to manage this risk including, for example, how they monitor threats, how frequently a penetration test is undertaken and the outcome of the test.
And lastly, but also very importantly, there is the scheme strategy. For Defined Benefit (DB) schemes, activities in this area often relate to de-risking, and for DC scheme objectives are frequently aligned to member engagement and communication.
Once the roadmap is defined then it is possible to call out data dependencies. So, for example, schemes who have been considering a trivial commutation exercise may choose to complete this before undertaking GMP equalisation to reduce the number of members whose benefits need to be equalised for the effects of the GMP. DC schemes looking to implement or refresh a member self-service portal may want to consider how this will interact with the pension dashboard and so on.
It is only by being clear about what needs to be done, why, by when, and the member impact and relative priorities, that trustees can define their data strategy. To do this they will need to work collaboratively with their administrators, involving other advisers where necessary.
Once the data strategy is in place the focus needs to move to delivery. Creating a data matrix helps in delivering the strategy cost effectively. It assists in avoiding reworking that arises from visiting the record for one member multiple times. Defining and populating a matrix necessitates an initial commitment of time but is essential in delivering the return on investment mentioned previously.
To create a scheme matrix, for each project or report in scope, it is important to understand the population impacted so, for common data that would apply to all members, for GMP equalisation that may be only members with post-May 1990 GMP accrual (or it might be everyone with a GMP for conversion), or for a benefit rectification exercise, it might be only those in a specific category.
Having identified the projects and the populations, the next step is to identify the data items needed for each one. This is where other advisors may need to be involved, for example, the scheme actuary for GMP conversion, a legal advisor in relation to projects arising from the scheme rules, or a consultant specialising in de-risking activities.
At the simplest level the matrix will list the projects and populations on the vertical axis and the data items on the horizontal. Populating this with a simple tick or a cross where data is needed helps identify where individual data items impact on multiple projects. Once this high level view is established, more detailed reports at member level can be generated, dependencies established and priorities for data cleanse activities can be agreed.
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