Issue - meetings

·         GMP (Guaranteed Minimum Pension) Reconciliation

·         Membership Data Cleanse

·         Administration System Review

·         Annual Benefits Statement (ABS) Exercise.

·         Key Performance Indicators (KPIs)

11.1     The Committee considered a report providing general on matters relating to Pensions Administration activities.

11.2     The Committee RESOLVED to note the report.

·         GMP (Guaranteed Minimum Pension) Reconciliation

·         Membership Data Cleanse

·         Administration System Review

·         Annual Benefits Statement (ABS) Exercise.

·         Key Performance Indicators (KPIs)

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7.1.        The board considered a report providing an update on matters relating to Pension Administration activities.

7.2.        Councillor Carmen Appich (CA) asked why JLT (Jardine Lloyd Thompson), who have recently merged with Mercer, had been chosen to conduct the Guaranteed Minimum Pension (GMP) Reconciliation process on behalf of the East Sussex Pension Fund (ESPF).

7.3.        Kevin Foster (KF) explained that JLT had been commissioned by the Fund, following a procurement process, to provide the work on the basis that they had been deemed to be the best provider and had a track record of doing similar work for other pension authorities.

7.4.        Lynda Walker (LW) asked why a reference scheme test had replaced the guaranteed minimum pension system in 1997, and whether the ESPF was in a good position relative to other Local Government Pension Schemes (LGPS) in regards to the GMP reconciliation process.

7.5.        Andrew Marson (AM) explained that the original GMP system of requiring pension schemes contracted out of the State Second Pension Scheme (S2P) to provide a Guaranteed Minimum Pension for contracted out employees broadly similar to the pension amount an employee would have received if they had not been contracted out had proven very complex; so instead a reference scheme test was introduced to allow comparison whether a pension scheme’s benefits were greater overall than the S2P benefits and if so it was permitted to contract out. This was felt to be a more straightforward approach. LGPS had easily passed the test and had remained contracted out. AM said that ESPF’s GMP Reconciliation programme was making good progress in relation to others around the country.

7.6.        The Chair explained that GMPs were calculated as weekly amounts and asked whether the discrepancy threshold of £2 meant a discrepancy of 4p a week of pension, which would amount to £2.08 over the course of the year or whether it would be 3p a week, which would mean £1.56 per year. AM said he would confirm how the figure of £2 is arrived at.

7.7.        Diana Pogson (DP) asked when the process may be complete. AM said it depended on HM Revenue & Customs’ (HMRC) own deadlines, which have continuously moved in the past. He said that the reconciliation and rectification process, i.e., resolution of over and under payments to scheme members, should be complete by 31 March 2020 based on current HMRC guidance.

7.8.        The Chair asked whether the number of critical errors contained within the data held by ESPF is recorded and reported as a percentage, as is a requirement of pension schemes in the private sector.

7.9.        AM explained that the quality of the data held by ESPF is periodically scored as a percentage and this will be run again in September after the Annual Benefit Statements have gone out. He said that the quantity of errors has reduced considerably – with over 10,000 data items having been corrected – and the Fund has improvement the quality of its data  ...  view the full minutes text for item 7

50.1     The Committee considered a report on the progress of the Guaranteed Minimum Pension (GMP) Reconciliation Project.

51.1     The Committee RESOLVED to note the report.

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23.1.      The Board considered a report on the progress of the Guaranteed Minimum Pension (GMP) Reconciliation programme and a presentation from Steve Jones (SJ), Senior Manager, and Jane Garton (JG), Project Manager – Data Assurance Services, of JLT.

23.2.      Michael Mann (MM) clarified that the contract for the final phase of GMP reconciliation was awarded to JLT in April but contracts were not signed until August. This was due to delays caused by General Data Protection Regulations (GDPR) issues around sharing sensitive data with third parties. JG acknowledged that JLT started the process late but is putting all available resources into resolving the queries, which comprised 12-15 staff who were working on weekends.

23.3.      MM clarified that the 31 October deadline for submission of queries to HMRC was for queries that would be reviewed manually by an HMRC employee and that automatic queries would be accepted up to 21 December. MM advised that the actual number of over and underpayments of ESPF members’ pensions and the total liability to the Fund would not be known until all queries had been processed by HMRC, which is unlikely to be before Quarter 1 of the 19/20 financial year.  

23.4.      The Chair said the four-month delay in agreeing the contract with JLT could prove costly and observed that other administering authorities had not suffered delays in commencing the final phase due to GDPR issues. The Chair said it was likely that HMRC would end up delaying responses to administering authorities due to the volume of work they are facing. This was not a concern for the Board, however, but the timely submission of all queries by 21 December was, especially given the concerns raised about the process over the past three years by the Board and Committee, and the delay in signing contracts with JLT until August. Cllr Brian Redman (BR) added that it was disappointing that the Board still did not know about the Fund’s potential liabilities despite asking for them for 3 years.

23.5.      JG explained that in order to remove a liability from the Fund’s balance sheet where records do not match those held by HMRC, JLT must provide evidence to HMRC that an individual transferred out of the East Sussex pension scheme and moved on to a different scheme, e.g., that of a London Borough council. If evidence of this transfer cannot be provided by JLT then HMRC will not move the liability and it will remain with the ESPF, even if the ESPF records show the scheme member moved on. JLT will spend the remaining period from now and 21 December reviewing, matching and querying with HMRC either membership queries (where either HMRC has a record that the Fund should be holding GMP benefits and the fund doesn’t, or HMRC doesn’t have a record of GMP benefits that the fund is holding), or queries where  ...  view the full minutes text for item 23

8.1       The Committee considered a report on the progress of the reconciliation of Guaranteed Minimum Pensions (GMPs) records held by East Sussex Pension Fund (ESPF) and HM Revenue & Customs (HMRC), and noted the recommendation of the Pension Board to the Committee that, in the interests of moving the GMP reconciliation project forward, it endorses the officer action taken to have ITM conduct a 2 month project to reconcile and submit queries to HMRC. 

8.2       The Chair noted the Committee’s major concern that the report differed from the Committee’s resolution at its February 2017 meeting – where the Committee had resolved to follow officers’ recommendation for a tendering process for stage 2 of the GMP reconciliation to be undertaken.  The report before the Committee indicated a contrary decision taken by officers without reference to the Committee.

8.3       Committee Members agreed that they are ultimately accountable, not only for the performance of the East Sussex Pension Fund (ESPF), but for all decisions affecting the Fund’s Administration. The Chair of the Pension Board also expressed concern regarding any decision made by officers without reference to the Committee and the absence of clear information provided to the Pension Board. The Committee concurred and agreed that it is vital that the Committee and Board are kept properly informed of any significant proposals relating to pension fund administration. Both in this case and in relation to an earlier case referred to later on the Committee’s Agenda, it is clear that proper processes have not been followed. Furthermore, if a decision is time sensitive, it may be necessary for additional committee meetings to be held to enable due process to be followed.

8.4       Officers acknowledged the need for Committee to be fully aware of progress with GMP and other key administration and governance issues. Specifically officers apologised for not bringing back to Committee a tender decision as envisaged by the minute of the previous meeting. It was explained that this had not been done consciously and indeed the decision to appoint ITM had been made with regard to the need for progress to be made on this issue in the five months since the Committee had last met and the failure of the preferred procurement framework to provide a robust tender process. The Committee was assured that, in future, officers will provide information in a timely manner and engage proactively with the Chair and the Committee about any proposals in relation to the ESPF and its administration.

8.5     The Committee RESOLVED:                                               

1) to note the progress on the reconciliation of GMPs between HMRC records and the ESPF; and

2) to be provided with regular updates on the progress of GMP reconciliation.

12.1     The Board considered a report providing an update on the current status of the reconciliation of Guaranteed Minimum Pensions (GMP) between HM Revenue & Customs (HMRC) records and those of the ESPF.

12.1     JB confirmed that the fee for ITM to carry out the second stage of the GMP reconciliation was commercially sensitive but was a relatively small portion of the £120,000 budget the ESPF has put aside for 2017/18 for GMP reconciliation. The cost of ITM’s services was lower than its market rivals, and other users had provided good feedback about the service ITM provides. Business Operations has negotiated with ITM on behalf of the six pension funds it provides administration services for, and is  confident that the price is competitive. JB clarified that the first stage of the GMP reconciliation, completed by ITM, had cost £4,000.

12.2     The Chair expressed concern that there was still no indication as to the extent of the ESPF’s liabilities. He also expressed concern that the administering authority was doing work that should be HMRC’s responsibility and doubted whether the process would be complete by the deadline of December 2018, unless HMRC committed sufficient resources. The Chair noted that deadlines for completing the reconciliation process were now tighter than they had been at the completion of the first stage of the reconciliation. He also queried what other administering authorities were doing to reconcile their GMP records with HMRC’s.

12.3     JB estimated that 60% of administering authorities had not yet commenced the second stage of the process. He explained that the response time for HMRC was about three months and the purpose of the proposed ‘fast-tracked’ ITM project was to get ahead of the potential queue of administering authorities requesting records from HMRC. He said that a handful of administering authorities had gone through the second stage of the process but had not yet completed the third stage of rectification, and so had not published the extent of their liabilities – although they would likely do so within the next 12 months. 

12.4     BR said that he was relieved that the cost of the second stage was less than the allocated budget. However, he expressed concern about the progress of the reconciliation process since the Pension Board last considered it in February 2016, given the potentially significant financial liability GMP could impose on the ESPF. He asked whether the potential budget of £500,000, identified by the consultancy firm AON during a previous pension training session, was realistic.

12.5     JB said that further work would be required both to complete Stage 2 and also to carry out Stage 3 (rectification) but he expected the overall costs to be well under £ 500,000.He accepted that the reconciliation process was not as far along as hoped, due in part to the delays in the publication of the Norfolk framework for LGPS pensions administration support services, and the subsequent decision by the framework team to remove the pricing catalogue. However, he remained confident that there was  ...  view the full minutes text for item 12