Views from a Third-Party Evaluator
Whilst it is good that at long last the much awaited Lloyds’ ruling from the High Court regarding past transfers has been made, confirmation that trustees of DB schemes should revisit and, where necessary, top-up historic transfer values where there is inequality due to GMPs, is not necessarily as welcome.
The good news is the judgment does not require trustees to proactively correct previous transfers. Trustees will only be obliged to do so if an affected member makes a successful claim.
However, many trustees will consider whether they should take a pre-emptive decision to revisit all past transfer cases that are affected. This removes the uncertain possibility of future unknown liabilities arising from members’ claims and some trustees may consider they have a duty of care to take this course of action. Of course this noble path to certainty comes at a price, both due to the additional liabilities and the cost of yet another complex exercise.
So does this ruling have an impact on administration reviews or transitions underway? Is there a case for resolving this outstanding element of inequality prior to a move, ensuring that administrators have access to historical records to be able to take the necessary action?
As with most situations, there is no ‘one size fits all’ answer. For example, some trustees may prefer to resolve this issue prior to moving from their existing administrator, particularly if that administrator has been in place for some time. Using the knowledge of the Administrator who organised the transfers, created the records and the backing documents etc and for whom complete background information should remain accessible may well be the preferred course of action. Digging around for transfer information going back to the 1990s will not be a small task!
However, there are also strong arguments not to halt any transitions. For example, if an Administrator’s records are transferred in their entirety, there is no reason why a new Administrator could not do exactly the same as the previous Administrator would have done. Where the trustees have made a decision to transfer the Administration due to poor service or a loss of confidence with the existing Administrator’s capabilities to deliver a quality service, hoping they will be able to support further complex issues doesn’t suggest there will be a satisfactory outcome. In this circumstance it would not therefore seem appropriate to stop the transition as the risk of leaving the service in a deficient manner would be greater.
Lisa Riordan leads the Governance Service at Pi Consulting, and is responsible for Pi’s pension adviser reviews. Over the last 17 years, Lisa has led on numerous TPA evaluation projects, from operational reviews (working to improve TPA service delivery for trustees) to procurement exercises (identifying the right TPA for trustees and ensuring the service transitions successfully).