Hertfordshire County Council s15
PENSIONS COMMITTEE
WEDNESDAY 30 NOVEMBER 2011 AT 10.00AM / Agenda Item No:
2
REVIEW OF PENSION FUND ADMINISTRATION
Report of the Director Resources and Performance
Author of the report: Patrick Towey (Telephone: 01992 555148)
1. Purpose of the report
1.1 To provide the Pensions Committee with a quarterly report reviewing the administration of the Pension Fund.
2. Summary
2.1 This report is set out in two parts as follows:
· Part 1 reports on the performance of the Administering Authority and Scheme Employers in managing and administering the Pension Fund measured against performance indicators set out in the Administration Strategy
· Part 2 reports on performance and activities of the pensions administration service provided by the London Pensions Fund Authority (LPFA) for the quarter 30 September 2011.
2.3 Administering Authority Performance Indicators
There were no breaches of the Administration Strategy.
2.4 LPFA Administration Service Performance Indicators
The Service Level Target (SLT) for the LPFA has been breached twice. The breaches relate to a membership process and the volume of outstanding processes at 30 September.
At 30 September, the number of outstanding processes was 2,442 which are 942 above the SLT of 1,500. 2,115 of the outstanding processes relate to the provision of deferred benefit statements. This backlog of work will be resolved as part of the Data Improvement Programme which is reported in Appendix 2 in the LPFA report.
2.5 Scheme Employer Performance Indicators
No penalty charges were levied against scheme employers during the period to 30 September.
2.6 LPFA activities during the quarter July to September 2011.
LPFA activities during the quarter focussed on completion of audit work for financial year end. A life certificate exercise was also conducted to establish the entitlement to the receipt of pension. LPFA continued transition work on schools converting to academies; there were 17 in the last quarter.
3. Recommendations
3.1 That the Pensions Committee notes the quarterly administration and performance review of the Pension Fund. The Committee are also invited to comment on the content of the report highlighting any areas where it is felt further information or analysis may be useful in the future.
4. Background
4.1 Quarterly reports are provided to the Pensions Committee to:
· report statistical data and performance data that is measured against agreed performance indicators; and
· provide commentary on key administration activities carried out by HCC and the LPFA pensions administration service.
4.2 This quarterly report covers the period 1 July to 30 September 2011.
4.3 An update on the LPFA Transition Arrangements and Data Improvement Programme is provided in Appendix 2 of the LPFA report (part2).
5. Part 1 Performance of the Administering Authority and Scheme Employers.
5.1 Administering Authority Performance Indicators (Appendix 1)
There were no breaches to the Administration Strategy. The Annual Governance Report (AGR) of the Audit Commission was issued during the quarter. The AGR provided a positive report with only one recommendation relating to a reconciliation process. The LPFA has responded to this recommendation and implemented quarterly reconciliations to avoid a similar problem in the new financial year.
5.2 During the period an existing internal dispute resolution (ID) complaint progressed to stage 2 and the complainant also reported this matter to the Pensions Ombudsman. This related to the application of the Administering Authority’s discretionary policy of recovering overpaid pension in the event of the re-employment of pensioners’ where they are eligible to rejoin the LGPS. Legal Services are hearing the stage 2 ID and responding to the Pensions Ombudsman.
5.3 The Administration Strategy sets out a range of penalty charges that may be incurred by scheme employers for non-compliance with targets and required performance standards set out in the Strategy. No penalty charges were raised for the period to 30 September. All penalty charges raised to date have been paid.
6. Part 2 LPFA Pensions Administration Service Performance Indicators
6.1 As part of the transition programme, LPFA is implementing a new workflow system that will provide enhanced data for performance measurement of case workloads. The workflow system will be operational by 31 March 2012 and key performance indicators will be revised once this system is in place. In the meantime, the pensions administration service is measured by Service Level Targets (SLT) set out in the specification to the Contract Management document.
6.2 There were 2 breaches of the SLT where the timescales for one process has been exceeded and the agreed level of outstanding processes of 2,442 is in excess of the SLT target of 1,500. These breaches relate to the processing of Deferred Benefit statements (DBs) that HCC instructed to be put on hold whilst the administrator (Serco at the time) could meet the deadlines on the production of estimates and retirements that resulted from the redundancy exercise earlier this year.
6.3 The issues associated with the processing of DBs are being addressed as part of the Data Improvement Programme of work and a progress report is provided in appendix 2 of the LPFA report.
APPENDIX 1: Review of Pension Fund Administration and Performance Statistics
The following table is an analysis of performance data relating to the performance of the Administering Authority and Scheme Employers in managing and administering the Pension Fund measured against performance indicators set out in the Administration Strategy.
1. Administering Authority Performance Indicators
Administering Authority AdministrationThe following indicators measure performance and compliance with statutory requirements placed on Administering Authorities for the administration of Pension Funds.
Breaches of Administration Strategy
Measured by / Comments
Periodic Internal Audit reviews and Annual District Audit / The annual audit of the Pensions Fund Report and Accounts was carried during the quarter. The Audit Commission issued a positive Annual Governance Report with one recommendation relating to a reconciliation between systems holding data
Scheme Administration Complaints and Internal Disputes (IDs)
IDs may be raised by members where they are dissatisfied with a decision concerning their membership benefits. IDs may be raised either against the Administering Authority, for decisions relating to LGPS regulations, or, against the Employing Authority (for HCC staff) where there is some discretion about the final decision.
Type / Issue / Resolution
Administering Authority (AA) ID / Recovery of overpaid pension for re-employed pensioner / Response to the original complaint provided an explanation of the AA’s discretionary policy and the regulations requiring enforcement. The complainant has escalated their case via the ID and this has progressed to the second stage and the complainant has reported this matter to the Pensions Ombudsman. Legal Services are responding to this IDRP.
Scheme Employer Administration
The following indicator measures performance of scheme employers in the administration of the LGPS against targets set out in the Administration Strategy.
Scheme Employers Incurring Penalty Charges
Scheme Employer / Reason for Penalty / Amount / Date Paid
No penalties were charged for the period to 30 September 2011.
PENSION FUND ADMINISTRATION REPORT – PART 2
Author of the report: Mike Allen – Director of Pensions (LPFA)
1. Purpose of the report
1.1 The following report highlights key statistics relating to the administration of the Hertfordshire County Council (HCC) Pension Fund undertaken by LPFA. The report will also highlight updates on progress made on specific projects and a summary of regulatory proposals and changes which will impact on the Scheme.
2. Summary
2.1 Pensions Performance Reports
This is the first amended report issued by the LPFA and it is designed to provide the committee with the information they need to confirm assurance around the levels of service being provided to officers, employers and scheme members. This revised report has been agreed with officers at HCC and focuses on key performance areas and relevant scheme information.
2.2 Pensions Fund Statistics
Full details of the membership analysis and employer statistics are provided in the following table. There is a slight increase in the level of the deferred pensioners from previous figures to take account of those currently awaiting processing as part of the agreed project on data improvement.
Scheme MembershipAs at
31.12.2010 / As at
31.03.2011 / As at
30.06.2011 / As at
30.09.2011
Active contributing members / 28027 / 28020 / 27440 / 26792
Deferred members / 26558 / 26552 / 27179 / 27850
Pensioners / 20562 / 20754 / 21127 / 21384
Total Membership / 75147 / 75326 / 75746 / 76026
The number of active scheme employers in the Pension Fund now stands at 178, with a further 73 employers with deferred and pensioner liabilities. Over the last 12 months there has been a significant increase in the number of schools moving to Academy Status with 27 having successfully converted by the end of September.
2.3 LPFA Administration Service Performance Indicators
The Service Level Targets for LPFA have been breached twice during the quarter and this is principally due to the backlog of deferred benefit cases which account for 2,115 of the total outstanding processes of 2,442.
If these cases are removed from the statistics the total number of outstanding processes is reduced to 327, significantly below the agreed target of 1,500. The number of such outstanding processes has also reduced significantly from the 676 cases reported at 1st April 2011. These cases will still be completed within Service Level Timescales and for the most part relate to cases previously on hold awaiting additional information from the employer, member or other body and are currently being processed.
It should also be noted that where needed a number of deferred benefit cases continue to be processed, for instance where a member is considering a transfer out of their benefits or are nearing retirement. The backlog of these cases therefore only relates to those cases where no immediate action is required and which will be cleared in due course, post April 2012, as part of the project detailed in the summary report at Appendix 2.
The overall level of cases completed in the quarter is shown in the following table and shows for the most part the overall level of cases processed has remained broadly similar to previous quarters although scheme retirements continue at a relatively high level. A number of members continue to apply for passwords to enable them to access their records on-line and a further push to encourage take up will form part of this years Annual Benefit Statement exercise.
Key Processes and Outstanding ProcessesKey Processes Completed / 1.10.2010
to 31.12.2010 / 1.1.2011
to 31.3.2011 / 01.4.2011
to 30.6.2011 / 01.7.2011
to 30.9.2011
New Starters / 797 / 623 / 387 / 544
Transfers in to the LGPS / 202 / 307 / 235 / 253
Transfers out of the LGPS / 141 / 121 / 90 / 147
Retirement Estimates / 962 / 972 / 426 / 501
Retirements / 474 / 566 / 734 / 635
Deferred Benefits (Leavers) / 590 / 563 / 427 / 563
Refunds / Opt-outs / 219 / 165 / 146 / 133
Maintenance of Data / 1185 / 1540 / 1419 / 1779
Miscellaneous Correspondence / 421 / 504 / 222 / 457
MSS Password Requests / Queries / 0 / 0 / 399 / 196
Deaths / 146 / 253 / 177 / 271
Total Key Processes Completed / 5137 / 5614 / 4662 / 5479
Outstanding processes / 31.12.2010 / 31.3.2011 / 30.6.2011 / 30.9.2011
Outstanding processes (excluding deferred backlog) / 395 / 676 / 386 / 327
2.5 Scheme Employer Performance Indicators
There were 19 instances of late payments being made by employers during the quarter to September 2011 and details are provided in the attached table at Appendix 3. You will note that no employer was guilty of more than one breach in this period and that all but two of the late payments were 3 days late or less. The team continues to take a proactive approach to monitoring late payers and officers at HCC are kept informed of relevant statistics in order that appropriate action can be taken.
Details are attached at Appendix 3 providing statistics of all late payments made by employers over the last 12 months. Since May the statistics have been broadly encouraging with only 1 late payment in August and 2 in September, albeit in August there were a number of employers, including a significant number of schools, who were a day or so late in making payment.
2.6 Complaints
No complaints were received in the last quarter. Any cases taken up through the Internal Dispute Resolution Process or the Pensions Ombudsman are reported at 5.2 in Part 1 of the report.
APPENDIX 2: London Pensions Fund Authority (LPFA)
The following summary provides further information to the committee on the following specific areas:
1) Relevant regulatory changes, including the latest news on the potential scheme changes currently being consulted on.
2) Progress made on the two year integration plan looking to bring LPFA systems and processes into effect.
3) An update on the data improvement plan.
4) Other activity, including communications and staff development undertaken by LPFA to support HCC in delivery of the Pensions Administration service.
1. Regulatory Update
The last few months have been some of the busiest ever for the LGPS particularly as a result of the Hutton report on the future of public service pensions and the government’s signalled intent to reduce the cost to employers of providing benefits through an increase in member contributions.
Consultation on contributions
On 7th October DCLG published a consultation paper on the options for achieving the £900M savings required by government in the period 2012 to 2015.
The consultation paper included two options put forward by DCLG plus one proposed by the LGA on 21st September.
The DCLG recommendations propose a mixture of an increase in contributions to members coupled with a reduction in the rate of accrual over the next 3 years. Alternatively the LGA propose maintaining the current accrual rate of the scheme and maintaining the level of current contributions for members earning under £15,000 with increases of between 1.5% and 2.5%, depending on earnings for members earning above this amount. LGA additionally propose that members should be allowed to opt out of paying the higher rate of contribution and instead elect for a lower accrual rate for future benefits.