1. © Allen & Overy 2016 GMP reconciliation and rectification PMI Administration seminar, 29 February 2016 Geraldine Brassett, PASA and Helen Powell, Allen & Overy LLP

2. © Allen & Overy 201622 On the agenda for this session: 1 From reconciliation to rectification 2 Developing a scheme-specific rectification strategy 3 Legal issues with underpayments and overpayments 4 Dealing with difficult cases 5 Reducing the risk of complaints

3. © Allen & Overy 201633 The big picture: from reconciliation to rectification 2. Reconciling data 1. Getting started 3. Correcting benefits Why do schemes need to reconcile GMPs at all? What does GMP reconciliation look like in practice? What do schemes do about any errors identified?

4. © Allen & Overy 201644 Moving from reconciliation to rectification Matching records, within tolerance Member match but data difference Member discrepancies between scheme and HMRC Outstanding queries Split by membership status? Split members pre- and post-GMP payment age? Administrator’s closure report – initial analysis vs post-reconciliation position Consider scope of potential rectification work – e.g. deferreds/benefits in payment Set strategy for rectification 1. 2. 3.

5. © Allen & Overy 201655 Developing an approach to rectification Trustee duties −Administer the trust according to its terms −Pay the correct benefits −Safeguard the assets of the scheme for the benefit of the members Relevant factors –Type of error (underpayment/ overpayment) –Proportionality (e.g. GMP only pensions?) –Type of member (e.g. transfer/commutation)? Scheme impact –Impact on funding? e.g. multiple trivial underpayments –Can appropriate tolerances be applied? –Rounding –Corrective

6. © Allen & Overy 201666 Practical issues: underpayments Remedy underpayment Pension arrears Underpaid PCLS Interest Difficult cases? – Transfers – Commutation – Pension sharing orders – Deaths – Scheme administration member payment – Currently no mechanism – 2006 regulations – Can be paid as lump sum (NB tax implications) –Continuing breach

7. © Allen & Overy 201677 Practical issues: overpayments Amend rules, or augment individual member benefits? Write off? Seek recovery? If augmenting, impose special terms? Reduce to correct level Reduce to correct level; offset past overpayments? Past payments Future payments Scheme perspective: Overpaid pension/PCLS – see 2009 regulations Other amounts written off or not recovered – UAP rules/£250 easement Consider reporting requirements (TPR/HMRC) Eliminates overpayment, but formalises increase in liabilities Communications; practical and administrative issues Tax perspective: If unsuccessful

8. © Allen & Overy 201688 Dealing with difficult cases –Will any data be provided by HMRC? –Spouse pension? –Pre-death payments? –Issues with PRs? –Historic transfers out not normally included –Errors identifiable only by receiving scheme? –Bulk transfers? –Underpayment – relevant accretion rules? –Overpayment – augment or UAP? –Pension value is a factor in overall divorce settlement –Overpayment – recovery unlikely –Underpayment – rectify member only? –HMRC may not be able to identify commutation –What data is available? –Underpayment – complex issues re correction –Overpayment – augment or UAP? DeathsTransfers Pension sharing orders Commutation

9. © Allen & Overy 201699 These are presentation slides only. The information within these slides does not constitute definitive advice and should not be used as the basis for giving definitive advice without checking the primary sources. Allen & Overy means Allen & Overy LLP and/or its affiliated undertakings. The term partner is used to refer to a member of Allen & Overy LLP or an employee or consultant with equivalent standing and qualifications or an individual with equivalent status in one of Allen & Overy LLP’s affiliated undertakings. Questions? CO:25970256.1 Helen Powell PSL Counsel, Allen & Overy LLP Contact: Tel: + 44 (0)20 3088 4827 Mob: +44 (0)7920 271006 helen.powell@allenovery.com Geraldine Brassett PASA Board Member Contact: Mob: +44 (0) 7912 977721 Geraldine.Brassett@capita.co.uk