Agenda item

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7.         

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9.         

9.1.        The Board considered a report about the outcome of the Annual Benefit Statement exercise following the statutory deadline for completion of 31 August 2018.

9.2.        Brian Smith (BS), Head of Operations, said that Gildredge House Free School had now provided its end of year return allowing for the processing of its employees’ annual benefit statements.

9.3.        The Chair said that it was regrettable that a breach that effects the administering authority’s compliance with regulations had occurred. He was surprised that it seemed sufficient pressure at all levels was not applied to the school to get it to comply, particularly as the school’s belated compliance in the last 10 days showed it did have the ability to do so. He expressed disappointment that this incident meant that the ESPF had not achieved 100% compliance with the statutory deadline despite additional effort this year.

9.4.        Councillor Richard Stogdon (RS), Chair of the Pension Committee, asked what penalties could be applied to employers that fail to meet the deadline for end of year returns. RW explained that the powers of administering authorities are limited at the moment but the Pensions Regulator is lobbying Government to introduce legislation that would enable administering authorities to penalise employers.

9.5.        WN and RW explained that it was clear in legislation that it was the Administering Authorities’ responsibility not the employers’ responsibility to make sure Annual Benefit Statements are sent out in time. In previous years, with regard to the specific issue with Gildredge House,  the Fund has mitigated against the risk of breaching the annual benefit statement deadline by agreeing  with the employer  before the statutory deadline to issue a joint cover letter to their employees  with the reasons as to why the statement has been issued with last year’s data, and that an updated statement would be sent once the end of year data had been received and processed.  This meant that the Fund did not breach the deadline by failing to send out Annual Benefits Statements to the particular employer who failed to send in an end of year return. BS confirmed that the Gildredge House Free School employees had been contacted prior to the deadline informing them that they could view their previous year’s statement online. 

9.6.        BS explained that since the publication of the Board’s report it was discovered that an administrative error had occurred resulting in 2,500 active members not receiving their annual benefit statements. The Business Operations team is now investigating why this error occurred and has reported the breach to the Section 151 officer and Monitoring Officer who will decide whether to report it to the Pensions Regulator. BS added that the issue was being rectified and the employees will receive their annual benefit statements by the end of September.

9.7.        The Board members agreed that they were all very disappointed to hear that an admin error had occurred resulting in a failure to meet the statutory deadline despite regular assurance throughout the year that everything had been on course to meet the deadline. The Chair observed that this meant the deadline had now been missed for the fourth year in a row.

9.8.        The Chair asked how this error had not been picked up. BS said that Business Operations was analysing why the failure occurred but it appeared to be a new error that has not previously occurred. Business Operations is now putting actions in place to prevent its recurrence and will do its utmost to make sure it does not happen next year.

9.9.        RS asked about the identity of other administering authorities that had responded to the request for information about the percentage of their deferred members that have had their records suppressed. BS explained that they had all asked to remain anonymous but he confirmed that they were all county councils and that one is managed by Orbis.

9.10.      RS asked why there was such a range in the percentage of suppressed records from 3-34% amongst these administering authorities, and why ESPF was towards the upper end of the scale (with 25%). BS said that one authority that responded had undertaken a major piece of work to tackle the issue resulting in the reduction of suppressed records to 3%. This was the exception however and the majority had around 15% suppressed records.

9.11.      The Chair said that it was surprising that 240 deferred members who were entitled to their pensions had the status of ‘gone away’ and were not in receipt of it. He asked whether all of the Gone Away deferred members could be identified through data sharing with HM Revenue and Customs (HMRC) which was now possible following recent changes in legislation. BS explained that there was a cost of £6 and a response time of 4 weeks for any data request to HMRC, so it was only being used for gone away members who are approaching retirement age. DP suggested that many of the 240 deferred pensioners not receiving their pension were unlikely to be entitled to significant sums as people were unlikely to forget about significant lengths of service.

9.12.      AE asked whether the Pensions Regulator will fine the ESPF for this breach and who would be required to pay the fine. RW confirmed that the administering authority, East Sussex County Council, would be responsible for the fine but would recoup the money from the ESPF administration fund. The Chair observed that whilst the Regulator may be reluctant to use its powers it had fined London Borough of Barnet £1,000 for a breach and would be more inclined to fine East Sussex County Council if it continued to breach its statutory requirements.  OO said that the Regulator would consider mitigating factors before issuing a fine such as what the administrating authority was doing to prevent future breaches and its transparency in reporting the breach. 

9.13.      The Board RESOLVED to:

1) note the report;

2) express regret that the statutory deadline for Annual Benefits Statements had been breached; and

3) request a report at the next meeting on the outcome of reporting the breach to the Pensions Regulator.