There is a lot written about the mismanagement of funds, which refers to the lack of risk management (financial and Market) and irresponsible behaviour, leading to an incorrect investment decision.
However, here, by mismanagement I mean lack of proper administration and therefore lack of operational risk management (Operational risk management – Wikipedia) which leads to the administration errors of our hard earned money. This will include clerical errors, processing mishap and mishandling of the information which often does not get reported and therefore not accounted for whilst estimating the loss of value of our pension fund.
However, after a little bit of struggle, I found some examples of clerical and processing errors which were made public and may give you some indication of the losses.
In 2007, BBC (http://news.bbc.co.uk/1/hi/world/asia-pacific/7140165.stm) reported that Japan’s government is finding it hard, for almost 20 million cases, to confirm “who owns what” after a mishandling of the information by social insurance agents.
Last year, employees at a leading printer company in the UK went into liquidation. At the time employees were owed nearly £400,000 in wages and pensions contributions. It is believed April’s pension contributions were not passed on by the company to the insurance company and therefore only the existing assets of the pension fund had been protected.
Also, In January 2008, a review of 49,000 Armed Forces Pension Scheme files found 98 veterans had been overpaid, some of them for decades, caused by clerical error for which details are not available. Now, the taxpayers may have to foot the bill for £1.7 million (http://www.telegraph.co.uk/news/uknews/1576138/MoD-pension-error-costs-taxpayers-1.7m.html)
On speaking with one of the company, it was clear that most of the common mismanagement such as delay in processing pension money: the time it is deducted from salary and transferred into the investment account, losing returns for the investors are not even accounted for.
And maybe as an active reader of this blog, you would like to share some of the administration errors you have come across and think someone should be held accountable for.
Therefore, it is more important that investors should take ownership of their investment whilst ensuring not only service providers but also our employers are working efficiently and practicing a good operational risk management framework.
