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How to… manage quotations and benefit statements

1. Monitor the quality of your data

Schemes are required to set and maintain high levels of data quality. Good record-keeping will reduce mistakes in quotations and payments. Trustees, employers and administrators should discuss appropriate targets for ensuring that conditional data (the scheme-specific information required to calculate benefits) is complete and accurate. Document your plans for maintaining and improving data quality, and any steps taken.

2. Qualify your quotations

Ensure that statements and quotations are marked as being subject to the trust deed and rules. Any online tool, such as a calculator, which is made available to members should clearly state any limitations and the necessity for a formal estimate. This may help in the event of a mistake. Consider setting out the data on which a statement or quotation is based and asking the member to check that this is correct.

3. Take care when issuing a quotation

Many mistakes arise from simple miscalculations which could easily have been avoided by checking the sums. Don’t provide a quote before it has been checked. This is particularly important in situations where a member is making a significant decision in reliance on the information provided (eg when considering a redundancy offer or early retirement).

4. Make statements user-friendly

Design benefit statements and quotations so they are easy to read and key information is not ‘hidden’. Avoid using technical jargon where possible, or include a visible explanation. A member is more likely to be able to identify any errors if the benefit statement is clearly drafted. This can also help against arguments that a member has reasonably relied on an incorrect estimate.

5. Correct mistakes as soon as possible

If you realise that a mistake has been made in a quotation or other communication, don’t wait for it to become a problem. Contacting the affected member(s) straightaway and explaining the mistake can reduce the risk of members relying on incorrect information to their detriment, which in turn reduces the risk of claims for financial loss.

6. Monitor your administrators

Mistakes can quickly become costly, particularly if the mistake is repeated, or affects a class of members. Actively monitor your administrator’s performance. If a mistake is found in a benefit statement, ensure that the administrators have checked that the problem is not systemic, and have put checks in place to prevent recurrence.

7. Investigate financial loss claims

You will need to investigate any financial loss claimed by the member as a result of the mistake. For example, did the incorrect information directly cause a financial loss to the member? Would the member have retired anyway, even if they had received the correct information? Could the member have reduced their loss (eg by finding another job)? Ask the member for evidence in support of any amount claimed.

8. What about overpayments?

If a member’s pension was miscalculated, then it will usually be reasonable to inform the member that future payments will be reduced to the correct figure. The mere fact of receiving an overpaid pension by mistake will not, normally, give that member an entitlement to the higher pension. However, recovering overpaid sums for the scheme can sometimes prove difficult. Read more at allenovery.com/overpayments.