PPF update: the Pension Protection Fund issues guidance for schemes on reconciling GMP benefits
As a general principle, pension schemes are required to ensure that the data they hold is accurate. For schemes that enter into a Pension Protection Fund (PPF) assessment period, there is a need to ensure this comes into sharp focus as if the scheme does not have accurate records of a member’s benefit entitlement the member will not receive correct compensation from the PPF. Indeed, for schemes that were contracted out on a salary-related (guaranteed minimum pension, or GMP) basis, that includes making sure that the records the scheme holds in relation to members’ GMP benefits match those that NISPI holds in relation to those benefits, so that the correct level of GMP is included in a member’s benefit entitlement.
However, often scheme GMP records and NISPI’s records (both in terms of members registered and the amount of their GMP benefits) do not match for a variety of reasons – e.g. NISPI has not been notified of the complete contracted-out earnings history for a member or the information has not been fully picked up at NISPI’s end. Trying to reconcile the figures can be difficult, particularly if the scheme is old and the records are no longer available. The cost of trying to reconcile frequently outweighs the value of any discrepancies between the figures and so might actually be detrimental where a scheme is winding up, its funds are limited and there is no new money coming into it. Therefore, especially in a winding-up scenario, trustees often adopt a ‘tolerance range’ within which they will accept a value for the GMP (usually NISPI’s value, particularly where there are evidential difficulties in proving an alternative figure to NISPI)…
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