Trustees and other pension professionals have been urged to act now on their GMP duties and stop ‘ignoring’ the issue.
Data management provider ITM has warned that with just a few months left to register with HMRC to use its Scheme Reconciliation Service, trustees and administrators need to inform HMRC of their interest in SRS to prepare themselves for the “administrative burden” of reconciliation now.
“By doing so, pension administrators will be able to pay the correct benefits to their members and avoid the financial implications of having unreconciled data,” ITM managing director Guy Ridley.
The SRS is designed to give schemes the opportunity to reconcile their contracted out membership and GMP data against that held by HMRC.
When the deadline for GMP reconciliation was first announced, an estimated 20 million scheme members potentially had GMP records to reconcile. However, as of September, over a third of schemes had yet to express an interest in HMRC’s reconciliation service, ITM said.
The firm added that schemes failing to prepare for these changes will face “significant administrative challenges” and, in particular, those that fail to register for SRS before April 2016 will be unable to reconcile their data with HMRC.
A failure to reconcile data could lead to schemes having extra liabilities they are unprepared for, loss of reputation amongst members and uncertainty around data in future buyouts or transfer value exercise, leading to possible higher costs.
“The fact that firms will no longer be able to contract-out the state second pension represents the biggest administrative challenge for UK pensions in many years,” Ridley said.
“Tight budgets and limited resources mean that the labour and resource-heavy process of GMP reconciliation will distract pension professionals from their core responsibilities once the option of contracting-out is abolished.
“This issue can no longer be ignored. It is essential that scheme managers inform HMRC of their interest in the Scheme Reconciliation Service as soon as possible and prepare themselves for the administrative burden of reconciliation now.”