Let me ask you a question. You’re the chairman of a leading airline. The maintenance staff have told you that to be fit for purpose your aircraft needs to be completely taken apart and reassembled. If you don’t do this the maintenance staff advise you that they can’t be certain that everything will carry on working as advertised and there is a good chance that one of the wings might fall off.
a) Authorise the maintenance staff to take the aircraft apart and reassemble it
b) Wait for the wing to fall off, then fix it
Option b) is likely to be a much costlier job if the wing falls off while the plane is airborne.
Clearly airlines would only ever opt for option a), but it would appear that many trustees have been content to adopt option b) in relation to pension scheme data.
Everybody in the industry is aware that the standard of pension scheme data is generally poor, but until recently there has been an ostrich like mentality about addressing the issue, with many heads buried in a virtual Sahara of sand. Just remember which part of your body is most exposed in this scenario.
We have commented on this point in our earlier blog Pension Scheme Data Pass me a Shovel
The Pensions Regulator’s latest consultation on record keeping makes it clear that it considers poor scheme data as useful as a plane with no wings. And no engines. And a gaping hole in the side. It’s also clear that trustees are going to be required to address their data issues more effectively.
The Regulator has actually suggested that trustees might want to fix their data previously. It appears seriously miffed at the underwhelming response from trustees to this suggestion.
So now, the Regulator proposes to set targets for the accuracy of the common data which schemes must hold. The Regulator also proposes to review performance of schemes. Where schemes fail to have adequate plans in place to resolve data issues, the Regulator will require them to improve. My background is in Pensions Administration (so I empathise with the aircraft maintenance guys) and I couldn’t agree more with the Regulator’s view of the central importance of data to pension schemes. The Regulator notes that cost remains a significant barrier to trustees voluntarily taking the action they know is necessary to identify and rectify their data issues. The Regulator clearly sees this as a false economy, and an unconvincing reason for inaction.
Accurate data is a prerequisite to paying the right benefit to the right person at the right time – this is a bit of a cliché, but has become so only because it simply and succinctly expresses the raison d’etre of a pension scheme. As data also underpins actuarial valuations, its accuracy is important in ensuring the correct liabilities are being valued. Accurate data held in a well maintained data base hasn’t been valued much by trustees and employers previously, hopefully that will change, not just because the Regulator has decided to get its stick out, but because it actually is what all trustees should want for their schemes as of right.
Some people may have been attracted to this article by the suggestion that it might explain why planes fly. That’s what is popularly known as a tease. I’m not an engineer and don’t understand how a big chunk of metal can stay up in the sky. Slightly alarmingly, if this article from the Straight Dope is to be believed, the engineers aren’t entirely sure either.