Meeting documents

Pension Fund Committee
Friday, 24 November 2006

PF241106-16

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ITEM PF16

PENSION FUND COMMITTEE – 24 NOVEMBER 2006

PENSION ADMINISTRATION TEAM STRUCTURE

Report by the Head of Finance & Procurement

Introduction

  1. This report sets out proposals to strengthen the pension administration team, recognising their current workload and the significant changes anticipated in the national pensions agenda over the next two years.

    2. Background

  2. The pension administration service was brought back in house in April 2003, having been delivered for several years through an external provider. The new pensions manager, appointed as a result of this insourcing, inherited a backlog of cases and a team low in Local Government Pension Scheme (LGPS) experience. The subsequent introduction of SAP brought with it a number of system-compatibility issues which exacerbated the backlog and in order to address this cumulative problem, the pension manager enlisted business process re-engineering (BPR) expertise from the SAID business school in August 2005.

  3. From being initially organised on a functional basis (e.g. leavers, transfers out) – with staff being regularly rotated around the functions to gain experience, the structure was changed in April 2005 to an alpha split over three teams – each team consisting of one senior administrator (responsible for work allocation, checking of work and dealing with more complex cases) and two administrators of varying experience to cover the rest of the work. As a result of the BPR work, the decision was taken to set up a recovery team which would concentrate purely on attacking the backlog – by then some 5,211 cases - leaving the remaining three teams to concentrate on current casework. This structure was implemented in October 2005 and is shown in Annex 1. The recovery team was staffed by two temporary administrators (later made permanent) and a senior administrator who had returned from maternity leave.

    4. Current Perspective

  4. Over the past twelve months, the recovery team has made substantial inroads into the backlog which stood, at the end of October 2006, at 3,171 cases. The three teams dealing with current cases have experienced an increase in workload in this period - since March 2006 an average of 400 new cases each month – 826 in August and 658 in October. This, taken with a significant level of sickness absence in the teams, has resulted in current workload increasing from 2,891 in March 2006 to 3,676 at the end of October. In overall terms therefore, whilst the recovery team has made substantial inroads into the backlog, the current workload has increased so that in total, the rate of improvement has ‘plateaued’.

  5. It was this levelling off effect which prompted a review of the effectiveness of the current pension team structure, a review which highlighted a number of fundamental issues:

        1. The pensions manager has promoted a flat structure as can be seen from Annex 1 (download as .xls file) – but this means that she has been directly managing 18 staff. This has inevitably meant that much of her time has been focussed on staff issues making it difficult for her to develop a more strategic perspective - this is not sustainable or acceptable in the long term;

        2. The BPR proposal to establish a recovery team to address the backlog has been key to the improvement mentioned above but it is raising some management issues. The dedicated recovery team of three staff (2.6 FTE) is dealing with cases going back several years in some instances, where resolution requires interpretation of old legislation. It is proving difficult to motivate these staff over the long term, since they have to ‘unlearn’ their knowledge of current pension legislation to deal with these old cases and they have expressed concerns over losing touch with current legislative developments;

        3. The staffing of the three teams dealing with current cases does not provide a depth of resource – sickness absence can have a substantial impact on workflow and the absence of a management function in the team means that any reallocation of workload priorities then escalates back up to the pensions manager.

    Workload Issues

  6. As well as the backlog referred to above, there are a number of issues on the horizon which will impact heavily on the team:

        1. the ‘New Look’ LGPS is to be implemented with effect from 1 April 2008: the recent consultation exercise is expected to produce a favoured option this month on which the Department of Communities and Local Government will be inviting comment. Once the details of the new scheme have been confirmed, the government’s timetable suggests legislation being introduced in April 2007, giving the pension team twelve months to prepare for the 1 April 2008 implementation. Depending upon which option is chosen, the transition could potentially represent a significant workload in terms of interpreting technical issues, redrafting guidance notes, training and communication and the updating and testing of Axise, the pensions software;

        2. the triennial valuation of the pension fund takes place in 2007: as well as the normal and substantial work on this exercise from March 2007 onwards, involving all scheme employers and liaison with the pension fund actuary, the valuation will incorporate an assessment of the implications for Oxfordshire pension fund employers of the 2008 ‘New Look’ LGPS - this will inevitably generate an increased number of questions around the resulting contribution rates and the level of detailed discussion with scheme employers;

        3. the implementation of the BPR recommendations in respect of ‘TASK’. TASK is a workflow management system within Axise – the pension software - and provides a disciplined set of steps through the design of the work screens. This was heavily promoted by the BPR exercise as a way of addressing high error rates (identified by internal quality control processes at 27% pre-October 2005) but the work of reviewing each pension process, building screen formats, training and then rolling out is labour intensive and time-consuming.

    Proposal for new structure

  7. The new structure now proposed is set out in Annex 2 (download as .xls file) and incorporates the merging of the four teams (three current workload and one recovery) into two, each of which is managed by a new post of Team Leader. Key features of this new structure are:

    • Team leaders will be responsible for managing staff, allocating work, reviewing performance and dealing with technically complex cases;

    • Recovery work will be managed within each team and staff will be rotated on a six-month cycle, so that individuals will have the opportunity to maintain and refresh current knowledge;

    • Administrative support has been refocused to strengthen the ‘Technical’ and ‘Communications and Training’ teams within the pension service recognising that they will be meeting the brunt of the changes ahead.

  1. This new structure will relieve the pension manager of some of the day to day burden and enable her to take a broader view of service development – consultation and the implementation of new regulations; working with employers on service level agreement, benchmarking and monitoring service delivery and improvement.

    2. Financial implications

  2. The cost of the two new posts has been assessed as £71k in a full year (salary together with on-costs). Assuming appointments are made from 1 February 2007, the additional cost in the current year will be £12k.

  3. Given the convergence of workloads detailed above, it is envisaged that the recovery of the current backlog and the stabilisation of current workloads – running alongside the management of the changes to the LGPS – will be accomplished over a two-year period. Throughout this term, the service will revisit BPR and benchmarking to highlight how the cost base / performance levels are comparing to other local authority pension funds – perspectives which will be shared with employers and the Pension Fund Committee.

    4. RECOMMENDATIONS

  4. The Committee is RECOMMENDED to:

          1. approve the proposed new structure for the pension team at an additional cost of £12k in 2006/07 to be met from the Pension Fund; and

          2. note that the cost of £71k in 2007/08 will be incorporated into the pension administration budget proposals for next year to be presented for members’ approval in February 2007.

SUE SCANE
Head of Finance & Procurement

Background Papers: Nil

Contact Officer: Ken Bell, Interim Assistant Head of Finance. Tel (01865) 815411

November 2006

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