How investing in data quality can pay sizeable dividends
Quantifying the problem –
start with a data audit
LexisNexis® Risk Solutions recently carried out data audits for 84 pension schemes, covering a total of 11.6 million member records. By comparing these records to our comprehensive reference data on 56.5 million adults in the UK, we were able to see where there were inaccuracies in scheme input data to remediate, and where additional data could be appended to help fill gaps or enrich the information held.
On average, we found 85% were living as stated (a match between the address held and LexisNexis reference database). On this basis, scheme administrators might feel their data is good enough, but what about the 15%? Are mailing costs and associated resource being wasted contacting individuals at an incorrect address? How are you able to verify them if calling in or processing payment?
The overall data quality scores varied drastically, and the study also uncovered some significant statistics within the records processed:
Over 1 million records (9%) had out of date address details.
29,000 members (0.251%) were deceased.
Almost 7,000 (0.06%) had an incorrect date of birth.
The hidden costs associated with having these inaccuracies on their books could easily run into thousands and result in a poor member experience.
On a more positive note, the study also highlighted gaps where additional third-party data could be helpfully appended, to support proactive member communications and reduce false positives, including:
Landline numbers for 7.7 million members (66%)
Mobile phone numbers for 7.2 million (62%)
Middle names for 3.9 million members (33%)
Email addresses for 3.3 million (29%)
As the industry continues to digitalise, the ability to contact members proactively online and deliver both annual statements and general communications digitally, should greatly increase efficiency and substantially reduce the costs of expensive and time-consuming mail-outs. Additional details that help to identify members, such as middle names and aliases should also help with tracing, reducing the time and costs associated with remediation.
Key takeaways
What is most important is for businesses to understand which of their member records are clean, which require action and how data health can be maintained in the longer term, to deliver operational improvements, uncover significant cost savings, save reputational damage and secure positive member outcomes.
A data audit is a quick process, so what are pension providers waiting for?
Based on our experience of carrying out data audits for pension schemes, the average time taken to complete a data audit is around two weeks – often less.
However, many trustees are still waiting for key events to trigger a need for data improvement (see Fig 1), perhaps believing their data is ‘good enough’, or else unaware of the opportunities they could uncover for increasing efficiency and reducing costs.
Data maintenance should be treated as an investment, not a cost.
Boards of Trustees often regard data quality reviews and maintenance as a cost to the business. However, given that every decision must start with data, it’s important to view an investment in data quality as a critical investment in the future success of the scheme. Again, this is emphasised by The Pensions Regulator, which advocates that ‘improving data should be a continuous process, not a one-off exercise.’ [2]
There is a real opportunity for schemes today to reinvent themselves through digitalisation and to realign their business in a way that they can become more efficient and cost effective, whilst also avoiding poor member experience or exposing members to risk because of outdated data. Investing in improving and maintaining good data quality helps pension schemes communicate more effectively with their members.
Figure 1: The Digital Dilemma – Critical events that would trigger trustees to invest in data improvements.[1]
Schemes have a regulatory obligation to review data regularly
There is a regulatory obligation to review scheme data regularly and improve data where it isn’t good enough to run the scheme effectively. The Pensions Regulator makes it clear that: ‘Failure to maintain complete and accurate records means you are at risk of not meeting your legal obligations.’ [3]
As yet there have not been regulatory fines in the Pensions industry for poorly maintained scheme data, however as the Pensions Dashboard draws closer, The Pensions Regulator has been given new powers to ‘issue compliance notices and penalties to trustees and managers if they fail to comply with pensions dashboards requirements.’ [4]
These requirements will include complying with data standards, so although the Dashboard is still two years away, nevertheless it makes sense for pension schemes to plan for this requirement.
Pensions dashboards will rely on good quality data
High-quality, well-maintained data will be a critical success factor in the planned development and roll out of pension dashboards generally. Pension trustees will face challenges in ensuring data matching services can return quick and accurate information on each pension enquiry initiated via the dashboards. Here, the focus will shift to the completeness and accuracy of the data held by each scheme.
The Pensions Dashboard is expected to stimulate unprecedented volumes of requests to the Pensions Finder Service, from individuals searching for their pension pots. This, in turn, will represent a very real challenge to pension providers in terms of their ability to tackle the significant spike in volumes.
Having good data quality in advance allows pension providers to start proactive member communications and engagement, to avoid this situation.
