23 January 2012 is Chinese New Year and also The Year of the Dragon. However, we believe that trustees should make 2012 The Year of the Trustee. The Pension Regulator released ‘Assurance reporting framework’ in December 2011 which for many independent trustees wanting to stay on the Pension Regulator’s Trustee Register is a crucial update and needs to be considered carefully, since being on the Trustee Register does not guarantee new business. However, we have no doubt it will help all trustees demonstrate good governance and improve pension scheme operations.

The Pensions Regulator has also said that the proposed framework will be relevant and useful to those whose trustees who provide these services but who do not wish to be on the Trustee Register.

Here are 10 ways that all trustees can demonstrate they operate sound administrative and accounting procedures:

1. Perform a risk assessment before accepting new appointments.
2. Monitor the performance of advisers and service providers.
3. Ensure that pension trustee fees and scheme expenses are accurately calculated in accordance with the terms of appointment, suitably authorised and recorded in a timely manner.
4. Segregate and safeguard cash and other assets held by, or on behalf of, the pension trustee in respect of your appointments.
5. Authorise and control payments and receipts.
6. Maintain minutes or other written records for all key meetings and decisions taken by the pension trustee in relation to the provision of pension trustee work.
7. At least annually update and record pension trustee appointment risks and mitigations in a risk register.
8. Clearly document and approve roles and responsibilities within the organisation relating to pension trustee appointments (including those functions and services ancillary to this work).
9. Back up your data and systems regularly.
10. Document, approve and maintain business and information recovery plans.

Comments on the proposed reporting framework should be sent to Jo Iwasaki, Audit and Assurance Faculty and The Institute of Chartered Accountants in England & Wales by 15 March 2012. Click to see the full article from The Pensions Regulator.

If you would like a no obligation 45 minute meeting to discuss your goals in respect of the proposed assurance reporting framework, please contact Gareth Burton or Terri Jarvis on 020 7917 2987 to arrange a convenient time.

This month we would like to thank Matt Ashton-Smith, Director of GMP Managed Limited, for his thoughts on Guaranteed Minimum Pensions.

There is no doubt that 2012 will see continued de-risking and cost saving measures in the pensions industry . An area that is commonly overlooked within Defined Benefit schemes is Guaranteed Minimum Pensions (GMP's).

GMP's are notoriously complex and poorly administered. The move from clerical paper based practice to computer based software in the 90's meant GMP data was often migrated poorly.

Perhaps most misunderstood is the impact GMP's can have on benefits. As GMP benefits commonly increase at different rates to other benefits, errors can lead to significant overpayments. In 2009 the National Audit Office (NAO) discovered GMP errors within Civil Service schemes that lead to overpayments in excess of £90 million.

Our experience suggests the average scheme has at least 10% of its pensioner population receiving the wrong payment due to GMP errors with the average member being overpaid by £1,000 per annum.

This suggests an average size scheme with 2,000 pensioners is potentially overpaying by £200,000! The cost to rectify these members pays for itself within the first year.

In addition to the potential savings to the scheme the following points should also be considered:

1. Preparation for Equalisation
   It now looks a foregone conclusion the Government will soon require schemes to equalise GMP benefits. All schemes with GMP will need to conduct a GMP data review and cleanse. The average GMP project takes 12-18 months so the sooner your scheme initiates this project the better.
2. The Pensions Regulator - Data Quality
   While not explicit TPR data tests inherently cover the presence of GMP data but do not yet test accuracy . It is only a matter of time before TPR focuses more on this area given the impact it can have on members’ benefits.
3. Wind-Up or Buy Out
   Any scheme considering winding up or insuring benefit using a buy-out provider will need to reconcile GMP data. Schemes with poor GMP data commonly need to pay an additional data risk premium for most buy-out providers.
4. Surrendering Contracting Out Certificate
   Any scheme surrendering a Contracting Out C/O Certificate automatically triggers a GMP reconciliation with HMRC. Acting proactively to address data issues and cleaning up your data file before this process pays huge dividends.

Historically GMP projects are run by the current scheme administrator at great cost and over lengthy time frames. This is usually due to a combination of poor resourcing and a limited understanding of the full process.

To ensure your projects are run efficiently we recommend using a third party specialist to represent the scheme in this highly complex area. They can then oversee the project on your behalf and keep the administrator on their toes.

For more information please email info@gmpmanaged.co.uk.

This month we are welcoming Alison Jones to the Ash Shaw team. Alison is an experienced accountant who has 14 years of experience heading up a large pension scheme accounting team for a major administrator in Reading.

We are pleased to welcome Alison to the Ash Shaw team who has already injected our team with her energy and enthusiasm for timely pension scheme accounts preparation and excellent client service.

Assurance reporting developments for Trustees - Monday, 13 February 2012
This workshop will be hosted by Gareth Burton and Terri Jarvis, co founders of Ash Shaw LLP.. Please click here for details and to register: http://ashshaw.eventbrite.co.uk.

If you have a set of pension scheme accounts and would like unbiased feedback from a specialist pension scheme auditor, simply email Ash Shaw and request a free accounts review.

To help us help you more swiftly, please send us a brief description of your situation (or a copy of last year's signed accounts if you are looking for new auditors) to Sally Tasker and let us know when would be a convenient time to call you.

If someone else has sent you this web link, why not make sure you get your own copy in future? Sign up to Ash Shaw's free monthly email newsletters and receive the latest information, news, ideas and advice. Focused on small- and medium sized pension schemes, these mailings tell exactly what you need to know, without wasting your valuable time. Sign up now.