Data a 'key concern' on risk settlement journey for 43 per cent of pension schemes

Data is now the key focus on the journey to risk settlement for over two fifths (43 per cent) of UK pension scheme professionals, a poll from Aon has revealed.

The poll, which was conducted amongst attendees at a recent Aon risk settlement webinar, found that there was a “clear preference” for data amongst the respondents, although insurer pricing and longevity risks were also identified as the foremost remaining risks.

Aon associate partner, Charlotte Quarmby, suggested this preference may be due to the importance of data when pursuing risk settlement in the form of an insurance buyout, arguing that "the penny has dropped...that clean data lies at the heart of so many activities".

"There is a direct link between data quality and pricing, with insurers more inclined to quote on the best-prepared schemes and reducing ‘prudence’ for data unknowns," she continued. "All this leads to better pricing."

Quarmby also pointed out that pricing is currently the most attractive seen in the past five years, suggesting that schemes that are ready to approach the market and have good quality data have an opportunity to get a good deal if they can act quickly.

"Clean data can really aid that process, enabling insurers to prioritise transactions in a busy market," she explained.

However, Quarmby acknowledged that there are other reasons for the realisation of data’s importance, as there is also an expectation from The Pensions Regulator (TPR) that schemes should maintain their data and improve its quality.

Adding to this, Aon associate partner, Hannah Brinton, suggested that pension schemes require a high degree of confidence in data to ensure the price paid for cover is as low as possible, explaining that many schemes may need to seek ‘residual risks’ cover as part of the risk settlement process itself.

She continued; "Greater – data-led - uncertainty will lead to either a higher price or more exclusions from the cover. Insurers will not want to be on the hook for corrections to future pensions which are the result of poor original data.

“GMP equalisation is another key factor. It’s increasingly at the forefront of schemes’ agendas and to be done correctly requires clean data. It will inevitably be a huge focus for the next few years.

“But ultimately, this increased focus on data will benefit all scheme stakeholders. Clean up-to-date data has to be a positive for all involved with a pension scheme, whether they are running it or a member.

"But when it comes to approaching a scheme’s endgame via an insurance solution it really is essential – and a major potential cost saver.”

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