Non-existent problems

As a dutiful son, I visit my mother as often as I can. She’s 82 and sharp as a razor, though she often pretends not to be. Don’t be fooled. She beats me at Scrabble almost as often as I beat her. Both of us play to win.

On a recent visit, she’d saved something for me. It was a letter from her pensions administrator asking her to fill out a form. “I reckon they’re checking I’m still alive”, she chuckled. They were.?

So I explained to mum that while she might well believe in the essential goodness of human nature, there were too many exceptions to the rule to let this go unchecked. She is a bit too squeamish for me to mention the recent American case where a couple kept the father’s mummified body for six years to keep collecting his pension. Something similar was uncovered in Sardinia as well in August. But I explained that it was not unknown for grieving partners (or children) to forget to mention to the pension scheme administrators that their spouse (or parent) had died, and that it was not unknown for them to “forget” either.?

Mum, who wrapped up my dad’s estate in 6 weeks after his death, accepted that not everyone was as practical or honest as she is. “I don’t mind”, she said, “I just thought it was funny”. I smiled dutifully.

For this isn’t really a laughing matter. There is abundant evidence that this forgetfulness and dishonesty becomes widespread if not addressed. In 2021, an American statistician concluded that China’s official population is 10% overstated, largely because?local governments inflate population numbers, on which their funding is based, and?people claim benefits that they aren’t entitled to. And this year’s winners of the Ig Nobel prize for Demography were authors of a paper that deduced that statistics on exceptional longevity were largely the product of the accuracy of historical birth registers and the availability of old age benefits now. By way of contrast, until very recently, no British hereditary peer - the best documented cohort of society, and one with no incentive to conceal a death - had reached age 100.?

Quite a lot of people will lie for money when it’s in their interests to do so and they think they can get away with it. If they don’t even have to lie, but just keep a bank account open, those numbers swell.

There’s a lot of talk about data cleansing right now. The Regulator only this week have put out a release on their data monitoring initiative in the last few days – they are going through scheme returns and taking a targeted approach to engaging with schemes where they think insufficient effort is being made on data quality. Schemes preparing for buy-in and buy-out want to make sure they’re securing the correct benefits. As well as obtaining accurate benefit specifications, trustees are accustomed to conducting tracing exercises for missing beneficiaries. These are becoming steadily more sophisticated, with some providers now using publicly available social media to locate hard-to-find beneficiaries who emigrated.?Some are touting their AI credentials in this area.

Trustees should pay equal attention to how administrators are reviewing the accuracy of the information that they actually hold. That’s something that is being undertaken as part of the pensions dashboard project. But often that seems to focus, at least as it is presented to trustees, on filling in known gaps rather than testing whether previously given information remains correct. It’s not just about updating addresses or marital statuses: if benefits are being overpaid, there’s a cost there too.

Trustee boards sometimes seem to feel that issuing certificates of existence for completion by pensioners is somehow gauche. They need to shrug off that feeling of diffidence and ensure that the scheme has a regular programme in place. Honest pensioners won’t mind, they’ll just find it funny. And if it flushes out a few cases of forgetfulness, that has a direct financial benefit to the scheme.

If you find such cases, there’s a separate question what to do about past overpayments. That’s a whole different article, but generally I recommend focusing on getting things right for the future.

All this, of course, is addressed in the Regulator’s General Code and forms part of what trustees must address when they concern themselves with the administration of the scheme as part of their Effective System of Governance. Perhaps I’m being harsh but I don’t yet get the sense that trustee boards as a rule are really engaging with these responsibilities, as opposed to setting up compliance measures. As Own Risk Assessments start to loom and trustees need to put something substantial on their report card, perhaps things will change. Let’s hope so.