Employers in the U.K. may be underestimating the risks associated with poor data quality regarding their DB plan members, according to Aon Consulting.
Aon Consulting’s latest Employer Survey found that 76% of employers said the quality of membership data is either of very low or low risk to their pension arrangements.
The survey found that 60% of employers consider certainty of cash contributions to be of low to very low risk, while 30% perceived intervention by the pensions regulator to be of high to very high risk to their business.
“Poor membership data carries a risk of unidentified liabilities emerging in the future bringing uncertainty into scheme funding decisions,” says Ian Bloxham, client relationships and development director, Aon Consulting. “Insurers require reliable, accurate data when pricing risk reduction programs. 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.
The study found 35% of respondents recognized future unknown liabilities as a high or very high risk to their plans, while 46% said certainty of value placed on scheme liabilities represented a high to very high risk to their business.
Uncertainty regarding liabilities is largely a result of poor quality membership data, Aon says, so these results suggest employers are failing to understand the dangers of not keeping their data in order.
“Despite recognizing unknown future liabilities and uncertain liability valuations as high risk, employers are failing to recognize the level of risk associated with the quality of their membership data,” says Bloxham. “This is in spite of the firm stance the pensions regulator is now taking in relation to pension scheme record keeping.”
