The government should halt its plans to switch off support for schemes trying to reconcile their Guaranteed Minimum Pension (GMP) records with those held by the State in October, Willis Towers Watson has argued.
The consultancy, which is working with over 100 pension schemes to reconcile GMP entitlements between scheme and HMRC records, has said that it is concerned that the government plans to stop accepting new bulk queries from pension schemes on 31 October. It believes this may mean many pension schemes will only have time to sort out the position for those with the biggest pension.
As a result, many members may end up getting the wrong pension benefits.
Sometimes this will be because the state will persist in using an incorrect GMP, meaning that the scheme will have to choose between using a GMP that is consistent with the state’s record and a GMP that they believe to be right. In other cases, it will be because schemes run out of time to properly examine all their records.
Willis Towers Watson believes that many pension schemes will need another 12 months of support from HMRC to complete their GMP work to a satisfactory level. It has cited a number of reasons to extend the deadline, including capacity bottlenecks; HMRC’s inability to provide GMP records until halfway through 2017 for active members when contracting out ended in April 2016; and an underestimation of the complexity and number of pension differences that would need to be investigated.
Philip Titchener, head of data solutions at Willis Towers Watson, said: “If pension schemes run out of time and are not able to complete this project, some people will get lower pensions than they are entitled to.
“Most private sector schemes have made good progress with their GMP reconciliations, but much work remains. Projects that were typically expected to take two years are often taking much longer, and there is simply not enough time and skilled resource available to complete all projects by HMRC’s deadline.”
Titchener added that there has been a sense that HMRC has been “playing catch up” and that the number of delayed responses it has accumulated has been a “momentum breaker”.
“We would ask the government to extend the deadline for submitting queries by one year. This would allow trustees to fully review all historic data sources and to conduct one or two more cycles of queries with HMRC”
“Without that extension, the risk remains that unresolved cases could have a material impact on individuals’ pension scheme and state benefits.”