Background

HMRC has been working with pension scheme administrators across the UK to reconcile scheme and HMRC records regarding contracted-out pension liabilities (GMPs). HMRC has returned all the outstanding queries issued to them and closed the reconciliation window to further queries but it is HMRC’s intention to issue one final Scheme Reconciliation Service (SRS) data report to every pension scheme before the end of this year.

The SRS data report will present the final membership and GMP position for every Scheme Contracted-Out Number (SCON) and concludes 5 years of reconciliation work between HMRC and the pensions industry. However, this is not the end of the process for pension schemes.

New Final Data Cut from HMRC

In order to ensure that HMRC has correctly acted upon all the instructions submitted by administrators and to identify whether any additional liabilities have been added to pension schemes by other schemes and providers as part of their reconciliation projects, the SRS report will require a detailed analysis. This means checking it against the final results held by each pension scheme administrator for each GMP Reconciliation exercise carried out. This analysis is a new piece of work above and beyond that already planned and carried out, and may not have been factored into GP projects to date; it was never HMRC’s intention to provide a final data report to pensions’ administrators.

Provision of the SRS report was only agreed with HMRC a few months ago following pressure from the pensions industry via the HMRC Forum. The pensions industry lobbied for this final report for a number of important reasons, including:

• scheme administrators need to have visibility of any additional liabilities that may have been transferred to their schemes by other firms during the course of their GMP reconciliation exercises; and

• HMRC records may not have been updated with information supplied by the pensions industry or it may not be correct even if confirmation has been received from HMRC. Therefore, a review of the final data report from HMRC is the only way to confirm reliably that the information held by HMRC agrees with the records for each pension scheme.

SRS data analysis

We recommend that for all the pension schemes for which a GMP reconciliation project has been undertaken, the Trustee should:
> complete an analysis of the reconciled GMP data against the final SRS data report
> check that the membership and GMP liability values agree with those on the HMRC database, and
> prepare a final GMP reconciliation summary of all findings and proposed solutions for any new membership, and GMP value discrepancies identified.

It will be necessary to complete this work in tandem with the Phase 4 GMP reconciliation work so that all necessary data are available for GMP equalisation. In addition, if the scheme at some future date moved to buy-out or winds-up, this summary will provide a robust audit trail and evidence what has been done.

Lorraine Harper
PMI Vice President and Director of JLT Employee Benefits

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