NORTH COUNTY COUNCIL

PENSION FUND COMMITTEE

25 November 2010

BENEFITS ADMINISTRATION REPORT AS AT 30 SEPTEMBER 2010

Report of the Operations Manager

1.0 PURPOSE OF THIS REPORT

1.1 To provide Members with information relating to membership movements, performance and costs of benefits administration.

2.0 REVIEW OF KEY EVENTS OVER THE LAST 6 MONTHS

Local Government Pension Scheme

The Hutton Report

2.1 Lord Hutton published his interim report on 7 October 2010, in response to a request from the Coalition Government to carry out a study of pension provision across the public sector. The full report is due in time for the Spring 2011 Budget. The initial findings include the following points

• the current arrangements are not sustainable and there will need to be structural changes to the pension schemes across the whole of the public sector

• public sector schemes should become the benchmark for the private sector to aspire to

• final salary schemes are no longer a fair and robust mechanism but ‘defined contribution’ schemes – where the employee takes all the risk and his or her pension depends on investment returns – are not the answer particularly for lower paid employees

• an alternative scheme model for a future scheme must look at all alternatives to provide fair sharing of risk between employer and employee. The final report will consider alternative structures including career average schemes

• future retirement ages must reflect changes to life expectancy

• pensions are long term commitments and any reforms should protect the rights that public sector workers have already accrued. The recommendations in the final report will consider how these rights are best protected

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There is a case for some increase in member contribution rates and Lord Hutton states this is a decision for the Government as part of the forthcoming Spending Review. However, the report highlights the risk of this during this current period of pay freeze. If pension contributions are considered to be ‘too expensive’, many current fund members might choose to opt out of pension funds, which could cause long term issues for the individual and the economy.

The report is of course only a recommendation to the Government and can be viewed in full at http://www.hm-treasury.gov.uk/indreview_johnhutton_pensions.htm

Admission Agreements

2.2 The latest position in respect of proposed and current admission agreements is set out in Appendix 1 to the separate report on this agenda Member and Employer Issues.

Year End data from Employers

2.3 The Team has received data from all employers and valuation data was forwarded to the Fund Actuary in full by the deadline date of 31 July 2010.

Benefit Statements

2.4 Benefit Statements have been issued for all employers. This year 48,300 statements have been issued in comparison to:

2009 35,067 2008 32,067 2007 26,063

The increase since 2007 is due to the excellent work of the Communications Training and Support team on data cleaning, data validation pre-valuation and calculation processing.

2.5 Combined Benefit Statements (statements including State Pension Forecasts) have been issued to members employed by Council and Scarborough Borough Council: the aim is to roll this out to more employers next year.

Tax changes to Pensions

2.6 In the Comprehensive Spending Review the Chancellor announced that there would be a substantial change to Pensions tax rules. The changes that will affect NYPF members and the administration of the scheme are:

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(a) Annual Allowance

Currently members are allowed to accrue up to £255k (actuarial calculation) in pension benefits in a year. This limit has been reduced to £50k for the tax year 2011/12. Although this is a personal taxation issue, NYPF is legally obliged to run a calculation to check every member annually at 31 March and inform any members who are over the £50k limit. This will mean additional work for the Administration Team and some development of the computer system to store the annual information and provide access to members to be able to download the information when required. The aim is to do this by developing the current member access online system to include the annual allowance information so as to be available to members online; for anyone over the limit they will be written to separately.

(b) Life Time Allowance

The Life Time Allowance is the amount a person is allowed to accrue in total pension benefits during their lifetime without incurring an additional tax charge. The current limit is £1.8m, this is to be reduced to £1.5 m from April 2012. This will not affect many members but is worth noting because there will be some additional work for the Administration Team.

3.0 STATISTICAL INFORMATION

Membership details and workload trends

3.1 Relative increases in membership since March 2009 are shown below:

28288 28,504 Actives 27939 27443 23256 Deferred 22,002 21230 Pensioners 19896 30/09/2010 14567 Pensioners & 14,137 31/03/2010 13783 dependants 13339 30/09/2009 2543 31/03/2009 Frozen 2,612 Refunds 2875 Types of movements of Types 2965 40 Undecided 134 314 Leaver 417

0 5000 10000 15000 20000 25000 30000

3.2 The increase in deferred members is due to normal leavers (leaving their accrued benefits in the Fund) and a reduction in undecided leavers.

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3.3 The number of cases dealt with in each category for each period is as follows:

2500

2000 1/10/2008-31/03/2009

1500 01/04/2009-30/09/2009

1000 01/10/2010 - 31/03/2010

500 01/04/2010-30/9/2010

0 Starters Deferred Refunds RetirementsTransfers Estimates Types

3.4 There has been an increase in the number of cases processed in the following categories:

• Deferreds – as indicated above the increase in deferred members comes from normal leavers and a reduction in the number of undecided leavers

• Retirements – there have been an increase in the number of redundancies and retirements which seem to be through efficiency savings and voluntary retirements (see Member and Employer Issues)

• Estimates – directly relates to the increase in retirements as the Team would process an estimate before a member retires. In addition the Team have calculated a high number of estimates for redundancy retirements which have not yet come through to actual retirement. The Team expects to see a continued high number of estimates over the next 12 months (the Team did 330 more estimates in this 6 months compared to the last 6 months).

Performance Indicators

3.5 The Local Government Pensions Committee (LGPC) has defined a range of performance indicators through which Pension Funds can be compared.

3.6 In addition to the last 6 months, the results for the previous 2 periods are also shown:

Indicator Target Performance Performance Performance against against against Target Target Target 1/4/2010- 1/10/2009- 1/4/2009- 30/9/2010 31/3/2010 30/9/2009 Letter detailing transfer in 10 days 100% 100% 96% Letter detailing quote of 10 days 100% 100% 100% transfer value Letter notifying estimated 10 days 97% 96% 100% retirement benefit amount Letter notifying actual 10 days 100% 100% 95% retirement benefit amount

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Note: the statistics quoted are affected by 3rd party turnaround times, ie includes the time a member takes to return their retirement forms, over which the Pensions Team has no control.

3.7 The cumulative average performance across all categories of activity is currently at 99% - the target performance in the Service Plan is 96% within the target period.

4.0 NYPFOG

4.1 The latest meeting was held on 30 April 2010 at County Hall.

4.2 46 delegates attended the meeting. The attendees represented -

Askham Bryan College District Council City of Council District Council District Council Scarborough Borough Council Enterprise Managed Services College Borough Council Council Joseph Rowntree Charitable Trust Selby Town Council NYBEP York College North York Moors National Park Authority York St John University County Council Yorkshire Coast Homes North Yorkshire Fire & Rescue Yorkshire Dales National Park Yorkshire Housing North Yorkshire Probation

4.3 Officers continue to receive good feedback regarding the content and overall usefulness of the meetings.

4.4 As part of the Fund’s Communication Strategy, road shows and information sessions are offered to all employers. From 1 April 2010 to 30 September 2010 the Pensions Team have attended:

No. of Days

Road shows (more than 3 pensions staff) 3 Information sessions (inc 1 to 1’s) 1

Pre-retirement courses 1

Total 5

The NYPF Communications Strategy details a target total number of events of 12 for the year.

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4.5 The following appointments are in the diary:

Month Venue 6 & 7 October 2010 City of York Road show 22 October 2010 NYCC - Pre retirement Course 27 October 2010 York College Road show 3 November 2010 NY Fire & Rescue Road show 10 November 2010 NYCC Drop-ins 17 November 2010 Selby College Road show 30 November 2010 NYCC - Pre retirement course 2 December 2010 Yorkshire Coast Homes Road show 9 December 2010 NYCC - Pre retirement course 10 December 2010 York St John University Road show 18 January 2011 Richmondshire District Council Road show 4 March 2011 NYCC - Pre retirement course 15 March 2011 NYCC - Pre retirement course

4.6 The demand for the Pension Team visits to present to staff continues to be high.

5.0 EMPLOYER DISCRETION DOCUMENT

5.1 It is a Statutory requirement that all employers in the Fund have an up to date discretion document. The discretion document sets out the policies of each employer in each area of the regulations that they have a discretion ie flexible retirement.

5.2 Members will be aware that they have asked for a rolling item to be included in this report that details which employers have completed and supplied a copy of their employer discretion document to the Operations Manager.

5.3 The current position is detailed below:

Category Number Number of Received No document received in documents document Category received

Councils 9 6 NYCC Craven DC City of York Ryedale DC Scarborough BC Selby DC Harrogate BC Hambleton DC Richmondshire DC

Police, Fire, 5 3 NYMNP NY Fire & Rescue Probation YDNP NY Probation services and NY Police National Park Authorities

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Category Number Number of Received No document received in documents document Category received

Town & 22 6 Marston Moor IDB Great Ayton PC Parish Foss IDB TC Councils TC Fulford PC (inc Drainage CC Selby TC Boards) TC Riccall PC Sutton in Craven PC Norton on Derwent PC PC Glusburn PC TC Richmond TC TC Malton TC Pickering TC Hunmanby PC TC PC

Colleges & 6 2 Craven College Askham Bryan College Universities York St John Selby College Scarborough IV College York College

Admitted 18 4 JRCT Welcome to Yorkshire Bodies Inspace Yorkshire Housing Superclean Craven Housing NYBEP York Museums Trust Richmondshire Leisure Trust Scarborough Museums Trust York Archaeological Trust Community Leisure Ltd Balfour Beatty Yorkshire Coast Homes Jacobs UK Veritau Ltd Wigan Leisure & Culture Trust Enterprise

5.4 The Team will continue to chase outstanding employers with targeted communications.

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6.0 EMPLOYER SATISFACTION SURVEY

6.1 The employer satisfaction survey has been issued to all employers with a completion date of 31 December 2010.

7.0 BENCHMARKING

7.1 The benchmarking results for the year 2009/2010 showed that the Benefits Administration unit cost for NYPF was £15.89 compared with £22.72 across the whole of the CIPFA Benchmarking Club (53 administering authorities).

The benchmarking results are summarised below:

Key – √ is good, x – is area for concern, o – is for information only

Benchmark Above Average Below Average Average Cost per member √ Information measurements Composition of members 0 Number of LGPS Employers 0 Joiners & Leavers 0 Retirements commuting to lump sum 0 Number of estimates provided 0 Number of actual calculations 0 undertaken Number of AVCs/Added Years 0 contributors Staff pay (nos staff in each range)

£50k 0 £40-£50k 0 £30-£40k 0 £25-£30k 0 £20-£25k 0 £15-£20k 0 <15k 0 Staff Qualifications √ Staff pensions experience > 1 year 0 1 - 5 years 0 5 - 10 years 0 10-15 years 0 15 years 0

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Benchmark Above Average Below Average Average Staff Turnover √ Performance Indicators

- Transfer In Letter √

- Transfer Out Letter √

- Process Refund √

- Retirement Estimate √

- Actual Retirement √

- Letter acknowledging of a death √

- Process deferred benefits √

7.2 In all aspects reported the position of the Team is average or better. It is particularly pleasing that the Team is above average in the ‘Performance Indicators’ section for producing calculations and letters.

7.3 Based on the above, there are no particular areas of concern to report this year.

8.0 RECOMMENDATION

8.1 Members to identify any issues/actions from this report that require further consideration.

K SCOTT Operations Manager

Finance and Central Services County Hall Northallerton

15 November 2010

Background documents: None

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