GMP Stalemate cases – close down reconciliation exercises before it’s too late by solving stalemate scenarios

22 October 2018

Schemes have less than two weeks to submit queries to HMRC for clerical review as the deadline of 31st October 2018 fast approaches.

After carrying out a GMP reconciliation exercise, many schemes find themselves with unresolved queries where they have reached a stalemate with HMRC. These stalemate cases can be the final barrier stopping schemes from concluding their GMP reconciliation exercises. As part of the Pensions Administration Standards Association’s (PASA) GMP working group, we have co-authored guidance designed to break-down what the options are when faced with these scenarios and what actions schemes should consider taking.

In any stalemate scenario, there are 3 possible options:

  1. Correct your figures or accept a liability
  2. Investigate further
  3. Do nothing

The right solution for depends on:

  • Past precedents
  • Confidence in data quality
  • Extent of investigations already undertaken
  • Impact on members
  • Impact on liabilities
  • Cost effectiveness of undertaking further work

To give you an example of what you can expect to find in the full guidance report, we’ve outlined some of the membership reconciliation scenarios below and the options schemes have for resolving these.

Example 1

If a scheme believes a member has received a refund but HMRC has no record of it, it may be because they never received a Contributions Equivalent Premium (“CEP”). Depending on the amount of the CEP, these are the scheme’s options:

  • CEP < £17: Legally there is no requirement to pay the CEP if it is less than £17. Notify HMRC and accept the scheme record
  • CEP is greater than £17 but relatively small: Consider paying the CEP with no further investigation
  • CEP is substantial: it may be worth investigating further to see if a CEP does indeed need to be paid
  • Accept scheme record: this means also accepting the risk that the member could contact the scheme in future regarding their refunded benefits and/or state scheme benefits

Example 2

If the scheme believes a member has transferred out but has no evidence of the SCON or ASCN for the receiving scheme that HMRC will accept, options include:

  • Contact the member: This approach is only successful if the member responds with evidence of where their benefits were transferred to
  • Accept scheme record: Accept the liability for the GMP and update the scheme record but reconsider in the event that the member ever comes forward claiming membership of the scheme

Example 3

If HMRC records indicate the GMP liability lies with a different scheme, the scheme can consider one of the following:

  • ‘Wait and See’: Some of these cases may resolve themselves as part of the industry-wide reconciliation activity currently in progress
  • Contact the other scheme to establish whether they hold the liability, this option is rarely pursued due to cost implications and the slim chance of getting a helpful response
  • Accept the scheme record: Review scheme records again and accept that the GMP continues to lie with the scheme

Getting scheme reconciliation exercises completed is now more pressing than ever, with the impending High Court judgement on GMP equalisation. In order to prepare for the changes schemes could be facing, it’s important to get data in order now. All GMP reconciliation exercises need to be completed before undertaking GMP equalisation – so with the outcome of this case expected imminently, schemes will want to ensure they’ve sorted out all those stalemate cases.

Read the PASA Stalemate Cases Guidance, co-authored by Capita Employee Solutions here.

Want to find out more or better understand exactly what this means for you? Our experts can help – get in touch here.

 

PASA GMP Stalemate Guidance

As part of the Pensions Administration Standards Association’s (PASA) GMP working group, Capita Employee Solutions have co-authored guidance designed to break down what the options are when faced with stalemate scenarios

Read the full guidance here

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