The importance of good records  

The recent guidance on Record-keeping issued by the Pensions Regulator highlighted the importance of maintaining good records, both in terms of scheme administration and the additional costs which can be incurred if information is missing or inaccurate. Issues in relation to scheme data often only come to light when some scheme change event takes place, such as entry into the PPF, wind up, buy–out or, more commonly, a change of administrator. In the latter case, the new administrator will expect to receive all the scheme documentation held by the old administrator to enable it to take over the administration of the scheme in what should appear to the trustees and members as a seamless transition. For a number of reasons, however, this does not always happen. If that is the case, what, if anything, can the trustees do about it?  

It is fair to say that where there have been problems some administrators are reluctant to release documentation and information to trustees or new administrators because they are concerned about errors being discovered and a resulting negligence claim. From the trustees’ perspective, however, they are more likely to be concerned about the need to administer the scheme properly going forward, than with a claim against the former administrator, which would be considered only if the problems caused previously were significant enough to make litigation worthwhile. Missing information can vary enormously and take the form of electronic records or hard copy member files. Some data gaps may be obvious immediately on the transfer, whereas others may not come to light until the new administrator has started examining documents to try and answer member queries or prepare benefit statements.  

Contract? What contract?  

The first port of call in these situations is the administration agreement. It should include terms setting out the requirements upon termination. However, this often proves to be difficult as it is common for there to be no written agreement particularly where the old administrator has been in situ for many years, or the agreement has been lost by both parties. Even if it is possible to locate an agreement, it may be silent or simply provide that the provision of information and data upon termination is to be the subject of a separate agreement between the parties.  

Some assistance may be found in the data protection provisions of the agreement, if they exist. These usually state that, as a data processor, the administrator has to process the data only in accordance with the instructions of the trustees and that it will comply with the security measures set out in the seventh data protection principle under the Data Protection Act 1998. If there is nothing specific in the agreement to point to, however, the trustees have to fall back on their general common law right to the return of documentation which belongs to them.  

Ownership of documents is a difficult issue upon which there is little, if any, case law relating to pensions administrators. Drawing an analogy with the world of accountancy, the ownership of a document (which has a wide definition) will likely depend on the capacity in which the administrator is acting and the purpose for which the document is created. Clearly, all documents and information which the administrator acquired on the commencement of the retainer will belong to the trustees. If documents were prepared or received by the administrator as agent for the trustees then these will also belong to the trustees. However, documents prepared by the administrator for its own benefit, such as working papers to enable it to undertake the calculations which sit behind benefit statements, could be classed as the intellectual property of the administrator and, as such, may not need to be released. Usually these manual calculations do not transfer to a new administrator, although it is arguable that they are an intrinsic part of the scheme and therefore should do so, on the basis that all member-related documents are trust property.  

Happily Ever After?  

As a general rule, trustees should not expect to receive absolutely everything held by former administrators and any action taken will depend on the extent of the information which is missing. For example, if there is an issue about the correct level of benefits then the new administrator will need to understand what assumptions were made at the time the original calculations were prepared. However, if it is only calculations that have been filleted from the administrator’s files, the new administrator may simply have to rework them and check for any errors.  

The standard remedy for lack of co-operation from a former administrator is to threaten an application to court for the delivery up of trust property. These threats, however, usually go no further as, once the reasons for the failure to provide documentation are explored in detail, the issues are almost always resolved on the payment of money to the old administrator in return for its assistance in dealing with queries, along with some sort of undertaking regarding the use of confidential information where appropriate. Potential negligence claims can sometimes be resolved by requiring the former administrator to put right what it did wrong free of charge.  

For a well-run scheme, of course, the problems created by inaccurate data should never arise and the new Pensions Regulator guidance on Record-keeping should help to make it less of an issue on a change of administrator in the future. As usual, however, the safest way for trustees to prevent any problems arising is to plan ahead and ensure that they have an agreement in place with their administrator which deals specifically with the issues that can arise on the termination of the relationship and transfer to a new administrator. The current Model Administration Agreement published by the Pensions Management Institute contains some clauses which are a useful starting point in this regard.