Agenda item

·         GMP (Guaranteed Minimum Pension) Reconciliation

·         Membership Data Cleanse

·         Administration System Review

·         Annual Benefits Statement (ABS) Exercise.

·         Key Performance Indicators (KPIs)

1.         

2.         

3.         

4.         

5.         

6.         

7.         

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 in comparison to other LGPSs

7.10.      LW asked how many employees there are in the one employer that has still not submitted its returns for the Annual Benefit Statement.

7.11.      AM said that the employer had a single employee in the ESPF, who is also the Chief Executive of the company. 

7.12.      The Chair asked whether the ESPF had considered meeting regularly with payroll staff in employers to ensure they were aware of their obligations as members of the ESPF, including the provision of up-to-date data to the Fund.

7.13.      IG said that the ESPF holds an Annual Employers’ Forum and the Pension Regulator attended the most recent one to explain to the employers’ their responsibilities around supplying data. He added that the Pension Board members were also in a good position to report back these responsibilities to the employers they represent. AM explained that there was a new team member joining the Pensions Administration Team (PAT) whose role is around engagement with and education of employers. He said the PAT realises that more work needs to be done engaging with employers, particularly as there are increasingly large numbers of them and the ESPF normally only contacts them formally on an annual basis and during the intervening period key contacts may leave, along with institutional knowledge of their obligations regarding the ESPF.

7.14.      The Chair commented that maintaining this relationship with employers was key because the GMP issue arose as a result of a lack of contact with employers, who then gave different data to the administering authorities and HMRC that now no longer reconcile.

7.15.      The Chair asked why, according to the Key Performance Indicators (KPIs), the PAT’s performance dipped during April.

7.16.      AM explained that the dip in performance was due to staff vacancies during that month. He said they had now been filled and figures for May were improving back towards normal levels. He added that whilst performance had slipped the cases that were overdue were only over by 1 to 2 days.

7.17.      The Chair said it was worrying to see the Award for dependent benefits (Death Grants) target missed given the impact this can have on families who may be in immediate need of assistance. He also asked that the KPI summary include details of what the longest overdue cases were and the average response time, not just the number within target, as it can be difficult to see any improvements particularly when all targets are green.

7.18.      Ola Owolabi (OO) said that the Board would have the opportunity in the future to review the KPIs as the pension administration system is re-procured.

7.19.      LW asked how the KPIs were set.

7.20.      AM explained that the KPIs have been set locally by ESPF and other LGPS will do the same. This means that there is variation in the KPIs, but an exercise could be undertaken to benchmark these measures against others to get a sense of the industry standard.

7.21.      The Chair asked whether the allocated duration of a ‘successful’ completion of an activity listed in the KPIs, e.g., payment of lump sum made within 5 days, was for the entire activity or just the part the PAT was responsible for.

7.22.      AM confirmed that these allocations were for the period of time the PAT was dealing with the case. Death cases, for example, would take a lot longer than 5 days and would involve other individuals, eg the member’s family, dependents and the legal personal representatives of the deceased member.

7.23.      The Chair asked whether the new pension administration system would be subject to a full procurement process.

7.24.      Kevin Foster, (KF) confirmed that the contract with Heywood to provide a pension administration system would be ending in 2021. The procurement of the new software would be a meaningful one involving extensive research into the current market and how it has changed since 2016; the quality of the competition; and the performance of the current provider. AM added that preliminary engagement was ongoing with providers to compare the PAT’s requirements with the capabilities of their systems.

7.25.      The Board RESOLVED to:

1)            Note the report; and

2)            Request a future report on how the ESPF KPIs for pension administration compare with those of other local government pension schemes.