Pension schemes are in denial about the gaps in scheme records, says Neil Copeland, who argues the the first step on the way to recovery is admitting you have a problem.
I'm thinking of founding Administrators Anonymous. It would be a bit like Alcoholics Anonymous, but designed for those trying to wean themselves off final salary pension schemes.
I came across an article about Alcoholics Anonymous the other day that quoted the Serenity prayer: "Grant me the serenity to accept the things I cannot change, the courage to change the things I can and the wisdom to know the difference." I was immediately struck by its applicability to pension scheme trustees.
It seems to me that trustees and employers spend inordinate amounts of time and money on having actuaries and consultants run all sorts of models with all sorts of assumptions, fretting about risks over which they have no control.
For example, neither trustees, employers or their advisers have any real control over future investment returns, future inflation, future legislation, future life expectancy or the future security of sovereign debt. I'm not suggesting for one minute that trustees should blithely ignore these risks. However, they seem to be blithely ignoring at least one serious risk over which they do have control and which they can change: data.
It's in this crucial aspect of pension administration where trustees' acceptance, courage and wisdom are needed here and now. The consequences of poor data can render all actuarial valuations and investment strategies completely pointless. Incorrect or missing data impacts on all key areas of scheme management. If the data is poor, that funding plan that has been agonised over with the employer isn't worth the paper it's written on.
To help combat this, I have devised a simple 12-step programme to help trustees cope with their data problems, based on the principles that have helped alcoholics, gamblers and even people with sex addictions successfully confront their various demons over the years.
I would firstly say that, as with all 12-step programmes, it is usually essential that you invoke a higher power for assistance. In this case, you are likely to need the input of a respected and experienced pensions administrator to ensure success through the entire programme.
Bearing that in mind, the 12-step programme for trustees struggling with data demons would look something like this:
As always with these self-help programmes, step one is the most difficult.
To make a serious point, and there certainly is one to all this, trustees and administrators need to engage and have an honest discussion about scheme data and how it can be improved. It's no longer an option to sweep this under the carpet.
Neil Copeland is head of the Trustee advisory practice at Spence & Partners.