The Pensions Regulator has turned its focus to the importance of good administration in pension schemes, having launched in February a campaign to improve administration standards and, in particular, encourage schemes to keep good records to ensure positive outcomes for scheme members.

While the campaign also covers working with NISPI's shared workspace and wind-ups, the principal emphasis is on good record keeping. Katherine Long, spokesperson for The Pensions Regulator, explains: "People drawing their pension expect payments to fully reflect the record of contributions they paid during their working life. Member benefits are placed at risk where records or data have not been properly maintained, so getting the administration correct is central to any pension arrangement."

Poor administration can be extremely costly to schemes in the long run. Correcting errors in record keeping retrospectively is complicated and longwinded, and can cause delays in the event of a buy-out or wind-up, which could clearly have an impact on member benefits. What might appear to be a minor error or gap in data could have major implications.

As June Mulroy, executive director for DC, governance and administration at The Pensions Regulator puts it: "Poor administration is not harmless or victimless. It can have a real impact on members. Inaccurate records might lead to people getting the wrong level of pension. The cost to the scheme of correcting data issues, or dealing with complaints, can also eat away at members' retirement pots."

Good record keeping is central to the running of a scheme right down to the way it is invested. As David Carstairs, head of sales and marketing at pensions administrator MNPA, says: "Good data is essential to understanding liabilities, and those liabilities dictate investments." It stands to reason, then, that it is in everyone's interest, particularly in the interest of scheme members, that all the data kept on a scheme is accurately recorded.

A key part of the Regulator's campaign is to highlight the roles
and responsibilities trustees and administrators have when it comes
to administration. Phil Yeoman, policy head for pension scheme administration at the Regulator, says: "It is about raising awareness among trustees about the importance of administration - to ensure that they have a good understanding. We found that, particularly among smaller schemes, trustees were less aware of our guidance."

And, of course, one of the main drivers behind the campaign has to
be an increase in confidence in pensions saving as a whole. At the campaign's launch, Mulroy said: "To inspire confidence in saving, we expect trustees and their administrators to place an unwavering focus on standards, and understand their respective responsibilities."

MNPA's Carstairs is enthusiastic about the Regulator's new focus on the importance of administration in pensions. "We believe passionately that it is the foundation for the way that the whole scheme is managed," says Carstairs. "It has been gathering momentum and we are very much in agreement that people need to understand the implication of having bad data."

Nigel Oakley, head of technical services at RPMI agrees that data needs to be in the spotlight, and particularly the type of data cleansing the Regulator is keen on encouraging. "If there are holes in the data, it will never get easier to correct those mistakes. It can only ever get harder. If there is salary history missing, for example, it is far better to try to correct those mistakes now, when relevant people are still with the company and the information may still be available."

These kinds of gaps in records can have a wide-reaching impact, says Oakley. "With holes in the data the scheme will have to make assumptions. And assumptions are just that. Sometimes you get them right, but sometimes you get them wrong."

Oakley is glad that administration, in the past seen as something of a "poor relation" within the industry, is now getting the emphasis it requires, and particularly pleased that the good administration campaign should help in defining the roles of the parties involved in pension scheme management. "The Regulator is right to target the trustee," he says.

The Pensions Regulator spokesperson Long explains the weight of responsibility on trustees: "Accountability for administration in trust-based pension schemes lies with the trustees. They can choose to delegate responsibility for administration but they retain ultimate accountability," she says. "Trustees need to have processes in place to ensure that what they have delegated is being delivered."

The Regulator's campaign speaks directly to trustees, with a clear and helpful website offering a selection of educational resources. There are online tutorials on record keeping, which highlight what can happen if records are inaccurate, with examples of cases which could lead to legal action. There are also tips for trustees on how to improve scheme administration, including learning what the scheme administrator should be doing and making sure this is the case, and understanding administrator reports. There is also a prompt sheet with plenty of practical tips to help trustees do their jobs and make sure records are up-to-date.

For Adam Walker, a partner at Barnett Waddingham, the Regulator has broadly got its approach right. He feels education is vital to improving administration, and adds that on the side of the administrators there is also a need for, in this case, formal education and qualifications. "As a firm we encourage all our staff to sit exams, and I think the pensions industry will be a better place if more people are taking qualifications."

Indeed, education plays a central part in keeping standards high. Capita Hartshead also takes education for its staff very seriously, as Andrew Short, technical manager at the firm, explains. "We believe education is vital in ensuring that administration standards can be raised to meet The Pension Regulator's expectations," he says. Many of the company's employees have sat Pensions Management Institute (PMI) exams, and Capita has also structured an internal training programme, which was designed with the PMI. "Consequently, our internal training is now recognised by a national qualification and ensures our new and existing pension administrators have a solid knowledge base to do their role," says Short.

But while education plays a key role, Walker believes that understanding the consequences of making administrative errors can also help
in improving administration and, in particular, record keeping. He feels there is also need for more specific warnings on the types of problems that can arise from poor administration. "Perhaps the Regulator can help by making clear the things that can go wrong, by giving examples of where schemes have got it [their administration and data] wrong, and the consequences of those mistakes," he says. "It might concentrate the mind to see the results."

Data cleansing, in particular, needs highlighting, says Walker: "It's a bit like looking under the bed when you haven't cleaned there in a while. You might not want to see what's under there but it would be much better to get the mess sorted out."

The pensions industry appears to broadly endorse the Regulator's decision to highlight administration. There is a consensus that it needs
to be made clear what a pivotal role administration plays in the way that schemes are managed, and that the consequences of a poorly administered scheme need to be put firmly in the spotlight. What's more is that trustees and administrators need to understand very clearly the roles and responsibilities they have in ensuring a positive outcome for
the members of the scheme. After all, as RPMI's Oakley says: "The
most important thing is member confidence. It was going, but we are now moving in the right direction towards getting that confidence back."

Sandra Haurant is a freelance journalist

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