Financial transactions

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Published: 17 March 2021

Governing bodies of defined contribution (DC) schemes must ensure that core financial transactions as defined in legislation^FI1 are processed promptly and accurately. Governing bodies of all schemes should also ensure that financial transactions are managed as part of their internal controls.^FI2

The Occupational Pension Schemes (Scheme Administration) Regulations 1996^FI3 set out the records that must be maintained by governing bodies of trust-based pension schemes. Under section 249A of the Pensions Act 2004,^FI4 governing bodies of certain schemes must establish and operate an effective system of governance (see Scheme governance) including internal controls (see Managing risk using internal controls). However, there are certain exemptions.^FI5

The Public Service Pensions (Record Keeping and Miscellaneous Amendments) Regulations 2014^FI6 set out the records that must be maintained by governing bodies of Public service pension schemes.^FI7 Under section 249B of the Pensions Act 2004 , scheme managers of public service pension schemes are required to establish and operate internal controls which are adequate for the purpose of securing that the scheme is administered and managed in accordance with the scheme rules,^FI8 and with the requirements of the law.

In their management of financial transactions governing bodies should:

Governance processes and IT systems

• Understand the procedures and controls the administrator operates to ensure that financial transactions are processed promptly and accurately. Learn more in Receiving contributions.
• Annually review all processes and systems related to financial transactions and identify opportunities to improve them (where the governing body can influence this).
• Ensure that any authorisation processes for any financial transactions do not cause undue delay.
• Seek to ensure that a segregation of duties exists in administration processes to prevent financial transactions without appropriate authorisation.
• Use electronic means to process financial transactions wherever feasible, for example only accept payments by cheque in exceptional circumstances.
• Have expected service standards or service level agreements (SLAs) in place which are specific to the scheme and administrative tasks (see also Managing advisers and service providers).
• Keep performance against service level agreements under review to maintain the processing of financial transactions, and be prepared to make a judgement as to whether this is satisfactory.
• Where appropriate maintain a dialogue with participating employers to facilitate the flow of necessary information, and improve those processes where needed.
• Ensure that scheme data is complete and accurate so that core financial transactions can be processed accurately. Learn more in Scheme records.

Investing contributions (if applicable)

• If the scheme operates a daily dealing cycle, contributions to the scheme, including sums transferred into the scheme, are invested within three working days following receipt.
• If the scheme operates a less than daily dealing cycle, contributions to the scheme should be invested at the next available dealing date, and within five working days.
• During reconciliations that identify discrepancies, only hold unreconciled contributions pending resolution and invest the remaining amount as usual.

Glossary and legal references

Internal controls

• arrangements and procedures to be followed in the administration and governance of the scheme
• systems and arrangements for monitoring that administration and governance, and
• arrangements and procedures to be followed for the safe custody and security of the assets of the scheme (Section 249A of the Pensions Act 2004)

Service level agreement

An agreement between a service provider and governing body setting contractually binding service levels that are to be met by the service provider in providing the service

^FI1Regulation 24 Occupational Pension Schemes (Scheme Administration) Regulations 1996
[The Occupational Pension Schemes (Scheme Administration) Regulations (Northern Ireland) 1997]

^FI2Section 249A Pensions Act 2004 [Article 226A Pensions (Northern Ireland) Order 2005], Section 249B Pensions Act 2004 [Article 226B Pensions (Northern Ireland) Order 2005]

^FI3Occupational Pensions Schemes (Scheme Administration) Regulations (Northern Ireland) 1997

^FI4Articles 226A of The Pensions (Northern Ireland) Order 2005

^FI5Section 249A(3) of the Pensions Act 2004
[Article 226A (3) of The Pensions (Northern Ireland) Order 2005]

^FI6Public Service Pensions (Record Keeping and Miscellaneous Amendments) Regulations (Northern Ireland) 2014

^FI7As defined in section 318(1) of the Pensions Act 2004
[Article 2(2) of The Pensions (Northern Ireland) Order 2005]

^FI8As defined in Section 318(2) of the Pensions Act 2004
[Article 2(3) of The Pensions (Northern Ireland) Order 2005]

Related content

• Administration: detailed guidance

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