Record Keeping in Pension Schemes

By Aaron Chikole Mukuwa

Last week we looked at the general responsibilities of Board of Trustees of Pension Schemes. This week, we focus on one critical area, which is Record Keeping. As highlighted last week, Trustees are entrusted with the general supervision and administration of Pension Schemes under Section 8(3) (b) of the Pension Scheme Regulation Act No. 28 of 1996 (As amended by Act No. 27 of 2005). Therefore, the Trustees are also responsible for maintaining and improving record keeping for their respective Pension Schemes. However, Trustees delegate such responsibility to service providers such as Fund Administrators and Fund Managers. The Fund Administrator is responsible for maintenance and safe keeping of scheme records among other duties on a day-to-day basis. It is the responsibility of Trustees and Fund Administrators of Pension Schemes to assess the quality of records for their respective Pension Scheme on a regular basis and, were improvement is needed, have concrete plans to improve them, including working with the respective sponsoring employers, other service providers and scheme members.

Good Pension Scheme Governance

Governance is defined as the systems and processes concerned with ensuring the overall direction, effectiveness, supervision and accountability of an organization (Good Governance; A Code for the Voluntary and Community Sector, June 2005). In the context of Pension Schemes, the International Organization of Pension Supervisors (IOPS) working paper No. 8, August 2018 defined governance as the framework by which the governing body, whether individuals or a corporate body makes decisions about the Pension Scheme’s business.

Record keeping in Pension Schemes refers to the process of organizing and storing all the documents and files relating to Pension Schemes activities. All Pension Schemes collect and hold records of information relating to scheme members, transactions, Investments, meetings and decisions.

Data held in Pension Scheme records

The following three different categories of data held in Pension Scheme records has been widely accepted:

  • Common data. This is a set of data which is necessary and applicable to all Pension Schemes. The absence of one or more of these items, or an error in any of them, is highly likely to mean that registration status for a scheme cannot be ascertained, or the member cannot be identified or traced, or the member’s benefits cannot be correctly computed with any degree of certainty. For the scheme, this may include certificate of incorporation from the Ministry of Lands and Tax approval from the Zambia Revenue Authority and certificate of registration from the Pensions and Insurance Authority. For members, this may include but not limited to National Registration Card number, surname, other names, sex and date of birth.
  • Conditional data. This is more detailed, data required for the proper administration of a Pension Scheme. The nature of this data varies from scheme to scheme, and depends on many factors. The presence of these data items is dependent on the type of scheme, scheme design, a member’s status in the scheme, events that have occurred during an individual’s membership of the scheme, and system design. Examples include but not limited to scheme rules and Trust deed, investment titles, contribution schedules, date of leaving (date joined scheme, current total deferred benefit, date of retirement/date pension started and additional voluntary contribution details.
  • Numerical data. This is information that is measured or relate to numbers. It is used to help understand and validate the results derived from the common and conditional data checks. Examples include but not limited to membership statistics (active, deferred, pensioner), pensioner membership by type (member, spouse/dependent/child), number of active and deferred members, number of active members with a transfer in recorded, and investment performance.

Benefits of good record keeping for Pension Schemes

The quality of record keeping has a huge impact on all aspects of the administration of Pension Schemes. Good record keeping supports better decision making by Trustees, service providers, scheme members and sponsoring employers. Some of the benefits associated with good record keeping in Pension Schemes are as follows: 

  • Service providers and Trustees. Holding good data is a prerequisite to Trustees and Service providers such as Fund Administrators and Managers discharging their fiduciary and statutory obligations to administer a scheme properly and providing members with an accurate value of their accrued pension benefits. Service providers and Trustees will be better able to make appropriate investment and management decisions if they are based on more accurate Pension Scheme records. Maintaining good quality of record keeping will also lead to meeting the terms required under the service level agreements.
  • Sponsoring employers. For Defined Benefit schemes, accurate data will enable the actuary to achieve greater precision in determining the scheme’s assets and liabilities. Sponsoring employers will have a more precise assessment of their financial liability and in turn a more accurate balance sheet.
  • Scheme members. Scheme members are likely to get the correct annual benefit statements benefits. Further, correct benefits will be paid to scheme members on time. This could result in the reduction of complaints lodged by Scheme members related to benefits payments and in turn instill more confidence in people on the operation of Pension Schemes.
  • Regulator. Good record keeping for Pension Schemes will contribute to the maintenance of accurate data for the pension sector by the Regulator and reduced supervisory costs.

Conclusion

Record keeping is a vital function in the administration of a Pension Scheme and a well-governed scheme is expected to have an efficient records management system and ensures that members’ rights are protected. It is therefore imperative that Trustees and various service providers employ an efficient records management system and ensure that Pension Scheme records are up to date and verified on a regular basis.

For comments, questions or clarifications, send us an email at pia@102.23.123.62. You can also call us on 211 251 401/5 or 0950 136662 or 0950 136663.

The Author is a Prudential Supervision Inspector in the Pensions Department at the Pensions and Insurance Authority.