GMP reconciliation and rectification Geraldine Brassett PASA and

GMP reconciliation and rectification Geraldine Brassett, PASA and Helen Powell, Allen & Overy LLP PMI Administration seminar, 29 February 2016 © Allen & Overy 2016

On the agenda for this session: 1 From reconciliation to rectification 2 Developing a scheme-specific rectification strategy 3 Legal issues with underpayments and overpayments 4 Dealing with difficult cases 5 Reducing the risk of complaints © Allen & Overy 2016 2

The big picture: from reconciliation to rectification 1. 2. 3. Getting started Reconciling data Correcting benefits Why do schemes need to reconcile GMPs at all? What does GMP reconciliation look like in practice? What do schemes do about any errors identified? © Allen & Overy 2016 3

Moving from reconciliation to rectification 1. Administrator’s closure report – initial analysis vs post-reconciliation position Matching records, within tolerance Member match but data difference Member discrepancies between scheme and HMRC Split by membership status? Split members pre- and post-GMP payment age? Outstanding queries 2. Consider scope of potential rectification work – e. g. deferreds/benefits in payment 3. Set strategy for rectification © Allen & Overy 2016 4

Developing an approach to rectification Trustee duties − Administer the trust according to its terms − Pay the correct benefits − Safeguard the assets of the scheme for the benefit of the members © Allen & Overy 2016 Scheme impact Relevant factors – Impact on funding? e. g. multiple trivial underpayments – Type of error (underpayment/ overpayment) – Can appropriate tolerances be applied? – Proportionality (e. g. GMP only pensions? ) – – Rounding Corrective – Type of member (e. g. transfer/commutation)? 5

Practical issues: underpayments Remedy underpayment – Continuing breach Pension arrears – 2006 regulations – Can be paid as lump sum (NB tax implications) © Allen & Overy 2016 Underpaid PCLS – Currently no mechanism Interest Difficult cases? – Transfers – Scheme – Commutation administration member payment – Pension sharing orders – Deaths 6

Practical issues: overpayments Scheme perspective: Amend rules, or augment individual member benefits? Write off? If augmenting, impose special terms? Future Past payments Reduce to correct level; offset past overpayments? Seek recovery? If unsuccessful Tax perspective: Eliminates overpayment, but formalises increase in liabilities © Allen & Overy 2016 Overpaid pension/PCLS – see 2009 regulations Other amounts written off or not recovered – UAP rules/£ 250 easement Consider reporting requirements (TPR/HMRC) Communications; practical and administrative issues 7

Dealing with difficult cases Deaths Transfers – Will any data be provided by HMRC? – Historic transfers out normally included – Spouse pension? – Errors identifiable only by receiving scheme? – Pre-death payments? Pension sharing orders Commutation – Pension value is a factor in overall divorce settlement – HMRC may not be able to identify commutation – Overpayment – recovery unlikely – What data is available? – Underpayment – rectify member only? – Underpayment – complex issues re correction – Bulk transfers? – Issues with PRs? – Underpayment – relevant accretion rules? – Overpayment – augment or UAP? © Allen & Overy 2016 – Overpayment – augment or UAP? 8

Questions? Helen Powell PSL Counsel, Allen & Overy LLP Geraldine Brassett PASA Board Member Contact: Tel: + 44 (0)20 3088 4827 Mob: +44 (0)7920 271006 Mob: +44 (0) 7912 977721 helen. powell@allenovery. com Geraldine. Brassett@capita. co. uk These are presentation slides only. The information within these slides does not constitute definitive advice and should not be used as the basis for giving definitive advice without checking the primary sources. Allen & Overy means Allen & Overy LLP and/or its affiliated undertakings. The term partner is used to refer to a member of Allen & Overy LLP or an employee or consultant with equivalent standing and qualifications or an individual with equivalent status in one of Allen & Overy LLP’s affiliated undertakings. © Allen & Overy 2016 CO: 25970256. 1 9