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ITEM PF16
PENSION FUND COMMITTEE – 24 NOVEMBER 2006
PENSION ADMINISTRATION TEAM STRUCTURE
Report by
the Head of Finance & Procurement
Introduction
- 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.
Background
- 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.
- 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.
Current Perspective
- 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’.
- 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:
- 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;
- 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;
- 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
- As well as the
backlog referred to above, there are a number of issues on the horizon
which will impact heavily on the team:
- 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;
- 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;
- 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
- 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.
- 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.
Financial implications
- 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.
- 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.
RECOMMENDATIONS
- The Committee
is RECOMMENDED to:
- 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
- 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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