Most UK employers operating defined benefit pension schemes are underestimating the risks and failing to understand the impact of poor quality membership data. Over three-quarters of UK employers (76%) say that the quality of membership data is either of very low or low risk to their pension arrangements, according to research from Aon Consulting.
Aon’s survey also reveals that 35% of employers consider future unknown liabilities of high or very high risk and 46% perceive certainty of value placed on scheme liabilities as a high to very high risk to their business. Uncertain scheme liabilities are a major consequence of poor quality membership data, so these results, when viewed alongside each other, suggest that employers are failing to understand the dangers of not keeping their data in order.
The findings come from Aon Consulting’s latest Employer Survey, which asked businesses a number of questions relating to their pension schemes and associated risks.
Other key findings from the research found:
60% of employers consider certainty of cash contributions to be of low to very low risk;
30% of employers perceived intervention by the Pensions Regulator to be of high to very high risk to their business.
Ian Bloxham, Client Relationships & Development Director, Aon Consulting said: “Despite recognising unknown future liabilities and uncertain liability valuations as high risk, employers are failing to recognise the level of risk associated with the quality of their membership data. This is in spite of the firm stance which The Pensions Regulator is now taking in relation to pension scheme record keeping.
“Poor membership data carries a risk of unidentified liabilities emerging in the future bringing uncertainty into scheme funding decisions. Insurers require reliable, accurate data when pricing risk reduction programmes. Data quality can have a significant effect on price. Indeed effective management of your scheme data can potentially save many millions of pounds when sourcing a buy-in or buy out policy.