Agenda item

11:50

This report updates the Committee on the key administration issues including the iConnect project, service performance measurement and any write offs agreed in the last quarter.

The Committee is RECOMMENDED to:

(a)       note this report;

(b)        agree to delegate the preparation of a response on the consultation of changes to the Fire Service Pension Scheme to the Director of Finance following consultation with the Fire Service Pension Board, and

(c)       agree the response to the consultation on the extension of the Statutory Underpin in the LPGP as set out in Annex 2, amended as appropriate.

The Committee considered a report (PF11) which gave an update on the latest position on administration issues and which requested determination on a number of issues as set out in the report, the resolutions for which are set out below.

Mrs Fox reported that at present the team was carrying vacancies for 2 senior administrators; 4.50 administrators and 2 administrative assistants.  An additional senior administrator vacancy had been created by the secondment of a member of staff who would be covering the current team leader’s maternity leave which started at the beginning of October. The senior administrator vacancies were not filled internally so those jobs would need to be advertised externally.  The administrator posts had been advertised externally with over 200 responses received. Following an arduous selection process 4 candidates had been appointed and would be joining the team shortly.

Both administrative assistant roles were out to advert, and it was hoped that appointments would follow shortly.  With such a high level of new recruits, team leaders were now setting out a training plan for our new entrants whilst maintaining the through put of work for the overall team. The employer team would be moving to their new operating structure so that team members would deal with a specific group of scheme employers for all contact with the Fund.

In relation to data, Mrs Fox referring to the addenda, reported thatScheme employers were required to submit both data and contribution payments by 19^th of month following payroll. Data returns were currently being made either via MARS or i-connect.  Late MARS returns had been recorded for six scheme employers in April and May; 3 scheme employers in June and 2 scheme employers in July. All returns were chased and subsequently received, so no fines had been issued. The data for the i-connect returns was not so clear cut given that employers were moving across to the new system and where payroll changes were taking place returns had been delayed, at our request, whilst member records were moved and data was locked down so that it cannot be overwritten. Where necessary chases for data returns had been made.  A new system report would enable better monitoring of the incoming returns.

As identified by the Pension Board’s review of the Pension Regulator’s Code of Practice 14, the performance reporting should include a regular review of the receipt of pension contributions from scheme employers and members.  This report had been developed and was provided as an addendum to the report. The address tracing exercise was now underway. A system report was due to be run shortly for review following end of year process, so that overall data quality scores can be checked ahead of the annual submission to The Pension Regulator.

The Chairman asked Mrs Fox to pass on the Committee’s thanked for all their efforts on completing end of year.

Complaints remained low and were all around ill health retirement. 

Administration to Pay project was due to be completed in December 2018 and had been subject to continual delays. Initial testing raised a number of queries which had to be referred back to our software supplier, the solution, re-testing and further referrals have gone around several cycles which are now coming to conclusion. This would be reported on at the next meeting.

In relation to iconnect, 153 Employers were currently live with 30 employers left.  Work was on going to bring on other scheme members.  The i-connect project finish date had been delayed due to end of year additional resource required, issues with larger employers and i-connect over writing information if not closed down correctly and issues with address data on file.

Sign up for the Members self-service currently stood at 42.16% (+2.27%) of active members; 28.89% (+1.93%) of deferred members and 39.77% (+2.78%) % of pensioner members.  The number of members actively choosing to opt out of member self-service are: active 1.33% (+.05%); deferred 2.71% (-0.02%) and pensioners 35.98% (-.034%).  From February 2020 members are able to run online calculations (estimates) of their benefits which, it is hoped, will increase the take up of this service.

Since the introduction of MSS this had been promoted as our main method of communication with scheme members and there had been annual exercises to encourage further take up. Therefore, it was hugely disappointing that having sent out emails to say that annual benefit statements were now available to view that the system has crashed several times during the week of writing this report. This has not just affected the Oxfordshire Fund but other Funds across the country. This matter was being dealt with.

19,142 ABS had been issued for members of 160 scheme employers. This represented 93% of active membership.  It was still hoped to run the majority of the outstanding statements by the end of the month in accordance with the requirements under the Regulations.

In relation to self-service, Ms Jo Robb questioned whether there were any plans to access how ‘user-friendly’ it was and to see whether those that used it liket the interface and were able to get the information they wanted.  Mrs Fox responded that the member self-service was part of the pension software package and that they did ask members for feedback, which generally they did not receive.  The suppliers did have a system of collecting suggestions and comments which they did respond to.

Mr Collins reported that they had seen a raft of consultations from the Government over the past few months.  The first announcement came out on the 16^th July regarding the Government’s response to the McCloud and Sergeant Court cases, where the Courts ruled against the Government, and declared the transition arrangements established under the major changes to the schemes following the Hutton review breached the age discrimination legislation.

In the first part of the announcement, the Treasury set out its proposed response in respect of the public sector schemes excluding the LGPS where changes had come into effect from 1 April 2015.  For this Committee this first announcement is relevant to the Fire Service Pension schemes.  The transition arrangements for firefighters were very different from the changes under the LGPS in that those protected scheme members remained in the old scheme, whilst everyone else was moved to the new scheme (some on a phased basis).  The proposed remedy was based on providing members with choice between which scheme they wanted to belong to, with a key consultation question in respect of when members make that choice – either immediately of at the time of retirement. 

Given the complexity of this consultation document (and the fact that the lead officer within the Pensions Service Team for the Fire schemes also plays a critical role in producing the Annual Benefit Statements for all Fire and LGPS staff), it had not been possible to produce a draft response in time for this Committee.  It was therefore proposed to draft a response in conjunction with the Fire Service Pension Board for submission to the Government before the consultation closes on 11 October 2020. This would be circulated to all members of the Committee prior to submitting.

The second part of the announcement on 16 July came from the Ministry for Housing, Communities and Local Government and proposed the changes to the LGPS Regulations to remedy the age discrimination identified in the McCloud/Sergeant cases.  In short, the proposal was to define all scheme members who were active members in the 2008 Scheme on 31 March 2012, and who had membership in the 2014 scheme without a disqualifying break in service as eligible for underpin protection.  This included all Members who had left the LGPS in the intervening period since 1 April 2014 who met the criteria.

The statutory underpin would apply for all membership for eligible members for the period 1 April 2014 to 31 March 2022 (the date applicable for the initial underpin, as those who qualified had to be within 10 years of their normal retirement date).  The membership must be within a single membership record, so any member who had had a break or move between Funds must elect to aggregate previous membership with their current record.  The Government was proposing to give those who previously chose not to elect to aggregate a further 12-month window in which they could make an election.  Where members were eligible for the statutory underpin, they would receive the higher of the pension calculated under the 2008 and 2014 Regulations for their qualifying membership.

The proposals would have a significant impact on staff within Pension Services, and within payroll teams within Scheme Employers.  There would be major challenges in ensuring they could retrospectively obtain all the data required to carry out the calculations of the pension benefits under the 2008 Regulations for the period back to 1 April 2014.  Whilst they had asked scheme employers to provide this data since 2014, it had not been loaded to the pensions system nor validated, so there now might be data that was missing or inaccurate.  It was also the case that they would not have received the relevant data in from other Funds where a member has transferred to the Oxfordshire Fund since 1 April 2014.

The points and others (particularly in respect of the potential issues associated with the annual allowance charge had been included in the draft consultation response included at Annex 2 to the report.  Members were asked to provide any comments and to approve the draft (as amended) for submission to the Government by the deadline of 8 October 2020.

At this stage it was not possible to calculate the cost of the proposals as final costs would depend on the future service records of all eligible members and the pay awards they received before their normal retirement date.  For older members and those who leave the LGPS in the near future, it was unlikely the cost would be significant as the 2014 Scheme on which current Valuations were based was likely to provide the higher pension based on a higher accrual rate (1/49^th of pensionable pay per annum rather than 1/60^th) and pay increases lower than CPI, the factor used to annual revalue the CARE pension.  For young scheme members, there was the potential for them to see significant increases in pay over the remaining period of their membership, either through promotion or pay increases, which would lead to higher costs where their pension benefits were higher under the 2008 scheme.  In the third part of the announcement though, the Government confirmed that they have un-paused the cost control mechanism, so that they might well see further retrospective proposals for changes in the scheme to increase the costs of the public sector schemes back to the minimum thresholds set under the cost control mechanisms.

On 20^th July the Treasury made a statement in respect of the Goodwin court case, where a member of the Teacher’s Pension Scheme brought a case of sex discrimination related to the difference paid to male and female survivors of the death of a female partner.  The Government had confirmed their intention to remedy the discrimination and to ensure similar remedies were applied across all public sector schemes.  The details of this and the potential costs were not yet known.

On 21 July 2020, the Government published their response to the consultation on introducing an exit payment cap of £95,000 on people leaving the public sector.  Despite concerns expressed in the consultation responses, the Government had opted to press ahead with their proposals and had published the draft Regulations.  Those Regulations now required approval in both Houses and would come effective 21 days on receipt of this approval.  It was understood the Government was seeking to complete the process before the end of 2020.

The draft Regulations confirmed that the early retirement costs met by employers would be included in the costs which were capped.  This would have implications for high paid and long serving staff, especially those made redundant soon after their 55^th Birthday, where the current LGPS Regulations required them to take an unreduced pension.  It was hoped that MHCLG would publish changes to the LGPS Regulations to be enacted alongside the introduction of the Exit Payment Cap to deal with this issue and other concerns, likely to be through giving those made redundant the option of deferring their pension, rather than being forced to take a reduction on their pension.  Since the writing of the report, Mrs Collins confirmed that this would now affect everyone made redundant after the age of 55 would be affected.  There was also a significant risk of scheme members not understanding the options available to them with up to five options which would need to be costed.  Legal advice would need to be sought before any action was taken on this.

The Chairman agreed that legal advice would need to be sought.  Mrs Fox reported that she had requested an initial meeting on this matter with the legal team.

Timing of the changes would be critical to the level of additional work on staff within Pension Services, as well as to employers looking to plan financial savings in light of the budget pressures arising from the current pandemic.  Of particular concern, would be redundancies agreed before the changes were made, but not actioned until after the Regulations become enacted.  Any calls for voluntary redundancies would also need to be clear of the potential impact on pension benefits if the new Regulations are enacted before the redundancy.

Finally, on 26 August 2020, the Government published their response to last year’s consultation on increasing flexibilities in respect of employer contributions.  The Government response stated strong support for their key proposals, with a subsequent request to fast track their implementation to support dealing with the financial circumstances associated with the Covid-19 pandemic. The Government had therefore agreed to take forward the following proposals and have published the draft Regulations under which they will be enacted:

a.  Increase the flexibility for the Administering Authority to request the Actuary to calculate a new employer contribution rate for one of more scheme employers between formal Valuations where there had been a significant change in financial circumstances. The flexibility also applied to the scheme employer, who could also ask for the calculation of a new rate.  Further details must be included in the Fund’s Funding Strategy Statement  

b.  Provide a formal power to the Administering Authority to spread an exit payment over an agreed timescale.  Many Funds had achieved this through side agreements, so the intention here was to introduce greater transparency and consistency, with the detail again to be set out in the Funding Strategy Statement.

c.   Provide the power for the Administering Authority to allow an employer ceasing to retain any active members to continue to pay secondary contributions to offset any past service deficit, rather than be required to meet a single cessation valuation.  Again, this was something the Funds including Oxfordshire had previously achieved through side agreements, but the changes including the requirement to set out policy within the Funding Strategy Statement, would improve the transparency and consistency of the arrangements.

Councillor Charles Mathew stressed that the extra work had been caused by the Government giving wrong information and providing inaccurate incomplete legislation and therefore a letter should go to Government seeking compensation for the additional work put on Pension Funds as a result.  Mr Collins agreed to add it to the Consultation response.    However, he stressed what was needed was skilled administrators to carry out the work.  He undertook to ensure that both points were in the response.

Mr Alistair Bastin reported that the initial thoughts from UNISON pensions representatives on the costs of sorting out the McCloud judgement and the extra cost of the underpin, would balance out what had been happening with the cost cap, so eventually it would be cost neutural.

RESOLVED: to:

(a)       note this report and thank staff for their hard work and efforts towards end of year;

(b)       agree to delegate the preparation of a response on the consultation of changes to the Fire Service Pension Scheme to the Director of Finance following consultation with the Fire Service Pension Board, and

(c)        agree the response to the consultation on the extension of the Statutory Underpin in the LPGP as set out in Annex 2, amended as appropriate.