internal audit: ensuring operational processes are fit for purpose
We carried out an audit of key administration processes and updated them where necessary
A client had recently experienced several issues in relation to their defined benefit pension schemes, which raised concerns that existing operational processes were not working as they should.
We undertook an audit of the operation of the schemes, their day-to-day administration, and consistency with their rules and with relevant legislation. We identified:
- Several areas where the mechanics of the calculations of pensions at retirement were incorrect, and benefits were therefore being materially overstated, with significant cost implications for the sponsor
- Inconsistencies and a lack of clarity in the way that pension increases were being calculated and applied; and
- That all the processes associated with the pension scheme were operated by a single person at the client, with consequent significant key person risk
We then worked with the client and their pension administrators in order to rectify the issues we had identified.
As a result the correct benefits were paid to members going forward, calculated on a transparent and consistent basis; and processes were better documented, and restructured, reducing the key person risk.
How we can help
We can help trustees and corporates review the operation processes of pension schemes and ensure they remain fit for purpose. We also advise on the potential impact of IORPII for UK pension schemes, including the governance, risk management and other implications.