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24.1.      The Board considered a report and a presentation by Hymans Robertson on the Data Improvement Programme and the Annual Benefit Statement (ABS) Working Group established to oversee it. Ian Colvin, Pete Riedel and Susan McKenzie attended from Hymans Robertson.

24.2.      MK explained that that it is proposed that the Working Group will be made up of Officers, Pension Board members, if the Board agree, and Hymans Robertson representatives. The Pension Committee is being recommended to agree to establish it based on its terms of reference and cost. She was looking for the Board to nominate its members to join the Working Group.

24.3.      LW asked whether the data improvement programme would be a one off. MK explained that the outcome of the working group would be reported to the Pension Committee in June and that the quality of data would be reviewed from time to time after then and reported to the Committee.

24.4.      The Chair asked whether the requirements of the Data Improvement Programme to have employers provide monthly data on their employees to the administering authority would be asking too much of small employers. 

24.5.      MK said that the plan was for a consistent process across all employers but that individual circumstances would be taken on board.

24.6.      The Chair asked what percentage of Local Government Pension Scheme (LGPS) have had problems with their ABS as a result of data issues.

24.7.      Ian Colvin (IC) said that during the first year after the introduction of the career average earnings pension there were a number of breaches of the ABS deadline, due to the increased complexity of the new system. Internal processes have improved since then, but it is still an issue for many LGPS.

24.8.      The Chair asked whether there were a wide variety of payroll systems used by ESPFs’ employers.

24.9.      IC said most larger employers used the big payroll systems such as SAPP or Oracle, but some smaller employers may only use an Excel spreadsheet. There was a wider issue that many employers outsource their payroll to an external company but do not include pension administration within the contract, and many payroll providers do not have the ability to undertake pension administration even when asked.

24.10.   The Chair asked whether the Fund should work with employers and payroll providers in that case.

24.11.   IC said Hymans Robertson is working nationally with payroll providers to encourage their understanding of LGPS pensions management, but employers are the responsible organisations the Fund should deal with. MK added it would be advisable to liaise with both.

24.12.   The Chair of the Pension Committee said it was likely that most employers’ payroll errors would be caused by failing to update an employee’s pay, meaning their pension contribution rates would be too low. He asked whether this meant there was a risk that the actuary was overestimating the funding level during the valuation of the Fund and that when the data was cleansed there would need to be an increase in employer contributions to make up the shortfall.

24.13.   IC explained that the actuary takes a prudent approach to valuating the Fund and this would be reflected in any assumptions made about the accuracy of the data and reflected in the proposed contribution rates of employers. MK added that correcting the data held by employers could also lead to lower employer contributions due to the prudent valuations.

24.14.   DP said there was a risk that the HR Managers did not generally understand the requirements of their employers with regards to pensionable pay and that this would mean the issue of employer data was caused by institutional shortcomings, rather than just common errors associated with data entry. She suggested the Fund ought to be providing employers with straightforward guidance on pensions. 

24.15.   The Chair observed the risk that leaving employees as “Status 2” (undecided leaver) within the Heywoods pension administration system, where it is not clear from an employer’s data whether they have left or not, could result in them being left in limbo and lead to errors in the data held by the administering authority. MK agreed that this was creating unforced errors leading to breaches of the regulations and was a problem for a lot of funds. The Board discussed the benefits of turning off this status in the system.

24.16.   The Chair observed that matching data held by the administering authority and employers could involve matching up several data points to ensure it is accurate, e.g., date of birth, National Insurance number, pension scheme number, etc. and that this could create a large amount of work for employers and it should be reviewed under the Data Improvement Programme whether all of this identification data is needed in the annual returns, or whether fewer items would be more efficient in matching records. 

24.17.   LW asked why the software currently in place does not flag up the differences in data help by employers with that of the Fund already.

24.18.   Pete Riedel (PR) explained that the systems are not linked together so data held on an employee can appear to be ‘correct’ on both systems and it is only when employers provide the data on an annual basis that errors become apparent. The data improvement programme and subsequent monthly returns via iConnect will help resolve this issue by ensuring the software programmes regularly ‘talk’ to each other. Andrew Marson (AM) added that the administering authority needs to be able to liaise regularly with the employers as they hold the correct payroll data on their employees from which their pensions benefits can be correctly calculated by Orbis PAT. PR said it is possible for an employer to be paying the pension contributions towards its employees but that their details have not been passed on to the administering authority meaning their pension benefits they are entitled would not be calculated correctly.

24.19.   LW suggested that employers should be made more liable for errors in the data they provide.

24.20.   AM agreed but the administering authority also needed a greater understanding of employers’ issues and capacity with regard to managing their pension obligations.

24.21.   The Board discussed the proposed structure of the working group and officer membership. The Chair recommended the addition of a ‘Steering Group’ comprising himself, IG (as Scheme Manager) and the Chair of the Pension Committee that would sign off on the milestones of the working group.

24.22.   It was agreed to discuss the proposals further outside the meeting for approval at the Pensions Committee.

24.23.   The Board RESOLVED to:

1) note the report;

2) agree to nominate Diane Pogson and Stephen Osborn to join the Working Group.