Contracting Out – Defined Benefit Pension Schemes
With a little less than six months until the end of contracting out, time is running out for decisions to be made around the two main issues; reconciliation of benefits for existing pension scheme members and for Defined Benefit (DB) schemes that remain open for further accrual, the increased National Insurance costs. Sponsoring employers and trustees have a variety of issues to consider.
Who are you and how much do we owe you?
Starting with reconciliation, pension schemes need to register with the National Insurance Services to Pensions Industry (NISPI) to begin the process of comparing their Guaranteed Minimum Pension (GMP) liabilities against Her Majesty’s Revenue and Customs (HMRCs) records.
The workload created for NISPI is already staggering with expressions of interest from 2,605 live schemes having been received and 2,392 of these schemes having received data for 13 million individuals.
The reconciliation process is a pure numbers game. Firstly, schemes need to agree with NISPI which members are part of the scheme and who isn’t, then agree how much GMP each member has. This process has historically taken years, so the sooner this is started the better.
It is highly likely that queries regarding member liabilities will be raised during this process and trustees need to be ready to make decisions regarding possible over-payments and membership issues.