Agenda item

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 more than enough time to complete the process before the end of 2018.

12.6     Tony Watson (TW) asked whether individual pensioners would face any liabilities should the GMP reconciliation result in them having received an overpayment. JB clarified that the Treasury’s advice was that if an individual pensioner has been overpaid that their pension is corrected going forward, but not recovered in arrears. He added that there is no statutory basis for pension funds not to pay underpayments and the Treasury advises that back pay is received from the day the GMP miscalculation was made. TW said that the ESPF should bear the cost of any pensioners’ arrears.

12.7     SM asked whether officers were confident that the project management of the second stage of the GMP reconciliation is robust. JB said that Business Operations was looking at the viability of appointing an interim project manager to oversee the project.He confirmed that they would not be employed on a consultant’s rate.

12.8     The Chair summarised that the Board was disappointed that it had not received more updates on the progress of the GMP reconciliation, but that the Board agreed with the proposals to move the project forward and wanted to be kept well informed of future progress.

12.       The Board RESOLVED to:

1) note the report;

2) to recommend to the Pension 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;

3) to request regular updates on the progress of the second stage of the GMP reconciliation, to include ITM’s progress reports, and a full report when the GMP liability of the ESPF is known.