Toonders sees data as a valuable commodity that can help us make good decisions, yet in the pensions world, we tend to see data as benign or boring at best, and an inconvenience at worst.
We are in the information business. We generate information to help people make choices, information to help companies know how much to pay in contributions, and information to help us sort out who manages schemes well and who doesn’t. However, data is only of value if it is factually correct and up to date, and how many of us really look at the pension data we hold and check if it is still fit for purpose? How many of us think of what we could and should do with the data we hold? How many of us get rid of the out-of-date data we have in our systems or our files? We’re often reluctant to do this as we spent some effort collecting it, and don’t want to let it go, just in case. Most of the time we just forget it’s there.
The Pensions Regulator’s (TPR) most recent survey of scheme data quality revealed some very disappointing trends. We’ve known for years how low down the agenda data sits with trustees, unless something happens to trigger a rush to bring it up to spec. In the early days when TPR started to measure data quality through its voluntary survey, many schemes took notice and started to carry out reviews and take steps to improve data. But after a few years, things started to slip.
The focus has always been on common data, which is the basic information held about members, even though conditional data is equally, if not more important. Schemes also worked out that you could never ever have 100% complete common data at any one time because data changes, so why bother? Besides which, there are always more interesting things for schemes to focus on (read: spend the money on), so no matter how much administrators raised the data quality flag, it always slipped down the agenda.
But data is a trustee’s duty and they must pay attention to it. Poor data stems from paying too little money or attention to administration over the years.
As for administrators, the most disappointing finding from TPR’s survey is that many don’t know the difference between common and conditional data. There’s simply no excuse for this, and if administrators don’t get it, we can’t blame the trustees for not stepping up to the plate.
So why should schemes take action now? Well, there are a number of reasons you should be cracking on with improving your data.
TPR’s voluntary reporting approach has not worked, so trustees will now be asked for information on data quality on the compulsory scheme return, and you will hear from them if you aren’t doing well enough.
Cleaning up data costs money, but most exercises pay for themselves in future certainty, and some can save a lot of money in the long run. For DC, the issue is acute, because wrong information is directly linked to member savings. For DB, many sponsors will be paying too little for tomorrow’s liabilities and others will be paying for liabilities that don’t exist. Schemes are missing out on the chance to fund in advance because they believe it’s OK to run with incorrect data on the understanding it will be sorted just in time for the benefit to fall due.
Many schemes wait for a de-risking exercise, like a buyout, to force a clean up of their data. However, the trustees then get an unpleasant surprise on buy-in when the data true-up means they have to pay an extra premium. If a scheme thinks it will buy out in the next 10 years, it should clean up its data to ‘buyout ready’ standard now – and might even find that buyout can be achieved more quickly.
Next to de-risking, the biggest catalyst for data cleansing will be the Pensions Dashboard. This presents an opportunity to help people see all their savings online on a single page, and then be able to take action. To do this, schemes will need to provide data, whether because it is the right thing to do for members or because it becomes compulsory. Data therefore needs to be good enough, but not necessarily perfect. We want to make it as easy as possible for schemes to participate, so PASA is working on a ‘Dashboard Ready Data’ standard. This is likely to be lower than 100% common and conditional data, but high enough that members have meaningful information and to limit the cost for schemes who want to be part of the Dashboard.
Schemes should want to have good data because it is really the most valuable asset they hold. Good data is the oil in the digital economy and the price of ignoring it could be high.
By Margaret Snowdon OBE
Chair of PASA and Non-Executive Director of TPR