Should there be a SIP data exchange standard?

Administration of a Share Incentive Plan (SIP) is a complex task. Many companies now seek to make SIPs available to their employees as a tax-efficient reward, linked to the success of the business. As well as various government imposed constraints on the structure of such schemes, which have varied over time, there is also considerable scope for the company to configure the plan to suit the business and the employees. Although some companies may seek to setup their own trustee and administrative function, many utilise third party administrators.

The popularity of such schemes and the flexibility with which they can be configured can lead to the creation of very large and complex data sets. These are necessary to provide a complete and accurate record of contribution and investment history and hence inform the trustee, HMRC and the participant employee. Sometimes of course, there comes a time when the trustees of a SIP decide that it is in the best interests of company and participants to move to a different administrator, and this brings me to the main focus of this short article…there are no industry-wide or government-imposed data exchange standards for SIP data.

Piers Solutions Ltd has delivered data migration solutions in many such SIP data take-ons and we think it useful to publicise how the establishment of an industry-wide standard would be beneficial. In its absence however, we can also highlight some of the challenges that we have had to address and currently need to be planned for.

In our experience, the analysis process usually starts with a notification from the administrator's sales team that agreement has been reached to take-on an existing plan and that the data migration needs to be planned and timetabled. Commonly, the cost and duration of data migration will not have been considered in detail, as those involved have often limited knowledge of the data.

Of course, if we knew that that the data to be delivered would conform to a standardised and agreed model, then there would be huge potential for reuse of existing tools. In reality, there is sometimes no specification of the structure and constraints of the source data available. Indeed, the scope of data to be provided is sometimes unexpectedly narrow, as some administrators have established practices that allow for some historic transactions to be archived or deleted, when others expect a full history from the plan inception. This variation in source data forces the migration team to undertake a detailed analysis, which commonly cannot start until test samples of data can be provided. Furthermore, the analysis process will commonly require discussion and clarification from the subject matter experts and technical teams of the existing administrator, which adds to cost and lead-time. It is unlikely that this would ever be entirely removed through the introduction of a standard, but the duration and effort would be reduced to a tiny fraction of what is currently necessary.

Many data integrity issues are found in older data which is rarely utilised in the administration, but are retained because, in rare scenarios, there is a need to make corrections to very old transactions and the impact can ripple through the subsequent awards. Such corrections would no doubt need to be performed differently if details of older transactions have been removed and replaced with summary-level records. However, given the frequency of this scenario, potential to reduce the size of bloated databases, as well as the simplification of data take-on, it seems worthy of deliberation.

Another area that relates to data volume and potentially old transactions is that of closed accounts, where participants have left or ceased to participate and have withdrawn their holdings. Commonly administrators will retain such data, sometimes with full transactional details for several years in order to comply with their data protection policy. However, when taking-on data, these accounts are sometimes excluded to simplify the task, which gives rise to some complexity for anyone seeking to exercise their data protection rights and needing to find their records. A standardisation on the industry approach here would make compliance more transparent.

There are many other common challenges such as the approach to recording re-employment through to the simple issues concerning the presentation of numerals at the correct level of rounding, all of which could be reduced by establishing a data exchange standard.

The answer to the question posed in the title of this article would seem obviously be ‘Yes’, given that the problems above inevitably add to administrative costs, and so are likely to hinder market expansion. So, either the senior managers of the administrators are unsighted on this challenge or there is an unwillingness or inability to collaborate on an effective solution. Perhaps as a first step, there should at least be a working group established to discuss and agree some key principles regarding the scope and quality of data that administrators should be able to exchange.

Until standardisation is introduced, the industry will need to rely on the knowledge and skills of the data migration experts who are tasked with transferring the data in an accurate, orderly and reconciled fashion. Pier Solutions Ltd has many years of experience in this data domain, using our flexible, but controlled process of data analysis, mapping and automation to take-on historic SIP administrative data.

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