The company believes schemes risk overestimating or underestimating their liabilities if they rely on assumptions rather than real data for their actuarial mortality calculations. The new services will further increase the effectiveness of the MUMS process and provide additional information to help schemes more accurately determine their liabilities.
MorganAsh is now working with The Tracing Group to provide the following services on a cost-effective basis for MUMS involving pension schemes of all sizes:
Comprehensive data overhaul. At the start of the MUMS process, records of scheme members will be checked to ensure they are as up-to-date as possible. This procedure will identify deceased members and ‘gone away’ members, those who have moved and not provided the scheme with their new address.
Andrew Gething, managing director of MorganAsh, said: “In the industry we’ve all heard the terrible stories of pension schemes writing to members who’ve been dead for eight years. Data cleaning to eliminate errors and ensure records are up-to-date is essential for trustees to have an accurate understanding of a scheme’s liabilities.”
Member tracing. Locating ‘gone away’ members for whom the scheme does not have an up-to-date address. Once located they can be included in the MUMS process, increasing overall accuracy, and records can be updated with those found to be deceased.
Marital status confirmation. Checking the marital status of scheme members, rather than relying on assumptions based on statistics for the wider population. A spouse or civil partner is likely to be entitled to benefits after a scheme member’s death and they need to be factored into liability calculations.
Mr Gething said: “The assumption used for many schemes is that 90% of members will be married. In studies we’ve undertaken over the past 4 years we’ve seen marriage rates for members of different schemes ranging from 54% to 84%. That level of difference applied to a pension scheme valuation could result in liabilities being overestimated by as much as 4%.
“That’s a huge variation, with a significant impact on funding requirements, which once again underlines the value of securing real data.”
The new services enhance MorganAsh’s MUMS process, in which pension scheme members are contacted and assessed to give a full picture of their health. This increases the accuracy of actuarial mortality calculations for pension schemes, because they are based on real data rather than assumptions.
This increased accuracy is important because where schemes underestimate or overestimate their liabilities this can affect company valuations and the funding and investment strategies for pension funds.
Mr Gething said: “We’re committed to providing schemes with the very best possible data, so they can calculate their liabilities based on evidence rather than assumptions, and these new services all have a valuable role to play in doing that.”
Danielle Higgins, managing director of The Tracing Group, said: “A growing number of schemes are using medically underwritten mortality studies and we believe that trustees will recognise the value added by eliminating data errors, tracing ‘gone away’ members and accurately assessing members’ marital status.”