PENSIONS COMMITTEE
TUESDAY 14 JUNE 2011 AT 10.00AM / Agenda Item No:
4
REVIEW OF PENSION FUND ADMINISTRATION
Report of the Director Resources and Performance
Author of the report: Lyn Stainton (Telephone: 01992 555394)
1. Purpose of the report
1.1 To provide the Pensions Committee with a quarterly report reviewing the administration of the Pension Fund.
1.2 To provide the Pensions Committee with an annual report on the Administration Strategy.
2. Summary
2.1 Pensions Performance Reports
This is the final administration report covering the performance of Serco Solutions’ pensions administration service which ceased on 31 March 2011. This report, therefore, covers the two month period to 31 March 2011.
2.2 Pensions Fund Statistics
There was an overall increase in membership to the Pension Fund of 133 members bringing the total to 73,780.
The number of active scheme employers in the Pension Fund is 122 (excluding schools) and officers are dealing with the admission or exit of 37.
2.3 Administering Authority Performance Indicators
There were no breaches of the Administration Strategy. Four complaints were received and responded to during the quarter.
2.4 Serco Solutions Administration Service Performance Indicators
The Service Level Agreement (SLA) with Serco Solutions has been breached twice. The breaches relate to a membership process and the volume of outstanding processes at 31 March.
At 31 March, the number of outstanding processes for the Serco Pensions team was 2,075 which is 575 above the SLA of 1,500.
These breaches have been reported to the London Pensions Fund Authority (LPFA) who have provided the pensions administration service from 1 April. The LPFA and Contract Management are in discussion to agree a plan to eliminate the backlog of work.
2.5 Scheme Employer Performance Indicators
No penalty charges are levied against scheme employers during the period to 31 March.
At 31 March, 97% of scheme employers paid monthly contributions by the due date.
2.6 Key activities carried out during the quarter, reported in section 6, include:
· Triennial Valuation
· 2010/11 Year End Exercise
· 2010/11 Annual Report and Statement of Accounts
· Transition to LPFA Pensions Administration Service
2.7 A Transition Status report is provided by LPFA to update the Pensions Committee on transitional arrangements and plans for improvements over the next two years. See Appendix 2.
2.8 The Scheme regulations require the Pension Fund to undertake an annual formal review of performance against the Administration Strategy. This is provided in section 7.
3. Recommendations
3.1 That the Pensions Committee notes the quarterly administration review of the Pensions Fund and the annual report on the Administration Strategy.
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 outsourced pensions administration service.
4.2 This quarterly report covers the final two month period for the pensions administration service delivered by Serco Solutions whose contract ceased on 31 March. From 1 April, the London Pensions Fund Authority (LPFA) delivers the administration service and will provide future quarterly performance reports. The first of these reports will be presented to the Pensions Committee at their September 2011 meeting.
4.3 An update on the LPFA transition and improvement programme is provided in this report at section 6.5 and appendix 2.
4.4 The Administration Strategy requires that a report of performance against the Strategy is provided to the Pensions Committee and employers on an annual basis. This is provided at section 7.
5. Pension Fund statistics and performance data
5.1 Pension Fund statistics and performance data is provided in Appendix 1 and the following sections provide a commentary on the results.
5.2 Pension Fund Statistics (appendix 1.1)
The changes to membership of the Pension Fund between 1 February 2011 and 31 March 2011 are shown in the table below:
Changes to membership from 1.2.2011 to 31.3.2011No. / %
Active contributing members / 5 / 0.02%
Deferred members / 18 / 0.07%
Pensioners / 110 / 0.53%
Total Membership / 133 / 0.18%
There has been an overall increase in membership of 133 members for the period. All membership groups increased during the quarter: active members increased by 5, deferred members increased by 18 and pensioner members increased by 110. The Pension Fund continues to mature where the number of pensioners and deferred members as a proportion of total membership is increasing and the proportion of active members is reducing. This is illustrated in the following table.
Breakdown of Pension Fund Membership GroupsMember Group / Quarter to 31.1.2011 / Period to
31.3.2011
No. / %. / No. / %
Active contributing members / 27,944 / 37.9% / 27,949 / 37.9%
Deferred members / 25,070 / 34.0% / 25,088 / 34.0%
Pensioners / 20,633 / 28.0% / 20,743 / 28.1%
Total Membership / 73,647 / 100% / 73,780 / 100%
5.3 At 31 March there were 168 scheme employers (excluding schools) of which 122 pay contributions to the Pension Fund and 46 no longer contribute but have members who are, or will be, paid from the Pension Fund.
5.4 At 31 March, the HCC Pensions team were working with 37 employers that were seeking admission to the Hertfordshire Pension Fund. During the period 20 new employers sought admission to the Pension Fund. Of the 20 cases, 19 related to schools transferring to Academy status and therefore becoming a scheduled body in the LGPS. The HCC Pension team in conjunction with legal services finalised the admission arrangements for 12 employers.
5.5 At 31 March, the HCC Pensions team were working with 4 employers seeking to terminate their Admission Agreements with the Hertfordshire Pension Fund. During the period 2 other employers sought to terminate their Admission Agreements and 3 cases were resolved. The HCC Pensions team is in consultation with employers and legal services to progress work for these employers.
5.6 Administering Authority Performance Indicators (Appendix 1.2)
There were no breaches to the Administration Strategy and no audit reports were issued during the period.
During January to March 2011, in collaboration with the Audit Commission (as part of their 2010/11 annual audit), an Internal Audit review was carried out during to test compliance systems and controls. The review did not identify any issues and the results of this audit will be incorporated within the Audit Commission’s 2010/11 annual audit report.
5.7 During the period 4 new complaints were received. Of the 4 complaints, 2 related to late response to enquiries, one related to a member that was not satisfied with the nationally agreed annual pensions increase and one related to a member who was not satisfied with the Pensions Ombudsman’s decision that found in favour of the Pension Fund.
5.8 Serco Solutions Administration Service Performance Indicators
(Appendix 1.3)
There continued to be 2 breaches of the Service Level Agreement (SLA) where the timescales for one process has been exceeded and the agreed level of outstanding processes is in excess of the SLA.
5.9 As previously reported, the breach in the volume of outstanding processes largely relates to the provision of Deferred Benefit statements (DB) (see section 5.12 and 5.13 below). This matter has been brought to the attention of the LPFA and discussions are in progress with Contract Management to agree a plan of action and timescales to clear the backlog.
5.10 Appendix 1.3 provides data relating to the volume of processes completed for each quarter in the past year. A summary of the change in the volume of key processes carried out by the Serco Pensions team between periods ending
31 January and 31 March is shown below.
Change in the volume to key processes and outstanding processes between for periods ending 31.1.2011 and 31.3.2011Key Processes / No. / %
New Starters / 24 / 3.6%
Transfers in – quotes and payments / 108 / 55.7%
Retirement Estimates / 36 / 3.7%
Retirements / 62 / 13.5%
Calculation of deferred benefits / 38 / 7.2%
Deaths / 59 / 34.7%
Transfers out / 12 / 9.8%
Refunds and opt-outs / 22 / 13.3%
Maintenance of members’ data / (75) / (5.2%)
Miscellaneous correspondence / 1 / 0.2%
Total completed processes / 287 / 5.5%
Outstanding Processes / 188 / 10%
* The two month period to 31 March has been prorated to provide a comparison against the volume of processes in the previous quarter.
5.11 There has been an increase of 188 in the number of outstanding processes at
31 March. The amount of outstanding processes was 2,075 which is above the Service Level Agreement target of 1,500.
5.12 The outstanding processes relate to 1,324 DB cases, 94 stockpiled cases and 657 general cases.
5.13 An age analysis of the outstanding process is provided in appendix 1.3. This shows that of the 2,075 outstanding processes 63.8% (1,324 cases) relate to the provision of DBs. The remaining 36.2% (751 cases) relates to all other processes. Of this total, 94 cases are currently stockpiled awaiting information from the Government Actuary’s Department and the remainder are general cases that are being actively progressed.
5.14 The key changes to the volume of completed processes during the period generally shows increased activity in providing retirement estimates and processing retirements which can be attributed to HCC’s voluntary redundancy programme. In addition, there has been increased activity in processing Transfer In requests following the issue of factors from the Government Actuary’s Department that enable the pensions team to calculate the transfer value.
5.15 Scheme Employer Performance Indicators (appendix 1.4)
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. For the period to 31 March,
no penalty charges were raised. Of the 6 penalty charges raised to date, 4 have been paid, one is not yet due for payment and one is outstanding and is being reviewed by the Debt Management team.
5.16 An analysis of the payment performance of scheme employers for March contributions payable by April 19 is shown in appendix 1.4. For the payment of March contributions, 97% of scheme employers paid by the due date, there were 4 scheme employers that failed to pay by the due date and all of these employers had made payment by 4 May.
The following table shows the number of scheme employers that defaulted on payment of contributions by the due date as at the end of each period over the past year.
Quarter to 31.7.2010 / Quarter to 31.10.2010 / Quarter to 31.1.2011 / Period to 31.3.2011Scheme Employers making late payments / 15 / 11 / 7 / 4
5.17 All scheme employers that fail to pay by the due date are contacted and
advised of their LGPS administration responsibilities which are set out in the Administration Strategy. A quarterly review of employers making late payment will be implemented and penalties levied where appropriate.
6. Key activities in the period
6.1 In addition to the routine activities carried out to maintain the membership database and process members’ benefits, the following key activities have taken place during the period.
6.2 Triennial Valuation
The triennial valuation exercise, to establish employer contribution rates for financial years 2011/12, 2012/13 and 2013/14, has been a major activity throughout 2010/11. There was a peak of work in December and January when the draft results were received from the actuary and circulated to employers. Discussions and negotiations with employers and the actuary continued throughout February and March to agree the final contribution rates.
The draft Valuation Report and Funding Strategy Statement was presented to the Pensions Committee at the March 2011 meeting. The Funding Strategy Statement was approved and it was resolved that the Director Resources and Performance be delegated to sign off the final Rates and Adjustments Certificate.
The final Valuation Report and certified Rates and Adjustments Certificate was issued on 31 March 2011. Employers have been advised that the final report is published and is accessible from the Pension Fund website at http://www.yourpension.org.uk/agencies/HCC/Tabfour/policy.htm
6.3 2010/11 Year End Exercise
Work continued during March to prepare employers for the completion of year end membership and contributions returns. The deadline for submission of year end returns was 29 April and at this date 76 (44%) were outstanding compared to 59% at 29 April 2010. All employers have been advised of the penalties that may be incurred.
At 31 May the HCC and LPFA Pensions team are working with 9 employers to ensure that all year end returns are submitted.
6.4 Annual Report and Statement of Accounts
During the period, the HCC Pensions Team began work to produce the 2010/11 Annual Report and Statement of Accounts. A separate report presented to this meeting provides the Pensions Committee with the unaudited Annual Report for consideration and comment before they are presented to the Audit Committee.
6.5 Transition to LPFA Pensions Administration Services
The HCC and Serco Pensions team have been actively involved in the LPFA project and action plans to transfer the administration service to LPFA on 1 April.
Progress against these plans is regularly monitored by the project board and a Status Report is provided by the LPFA as appendix 2 to this report.
7. Annual performance report for the Administration Strategy
The Scheme regulations require the Pension Fund to undertake an annual formal review of performance against the Administration Strategy. This review will be published within the 2010/11 Annual Report and Statement of Accounts and circulated to all employers in the monthly newsletter.
A summary of performance for the financial year 2010/11 is provided in Appendix 3 to this report.
APPENDIX 1: Review of Pension Fund Administration and Performance Statistics
The following tables provide statistical data and an analysis of performance data relating to the administration of the Pension Fund.
Performance data for this report is provided to 31 March 2011 which marks the end of the administration service provided by Serco Solutions. From 1 April 2011, performance data will be provided by the London Pensions Fund Authority (LPFA) and reported to the Pensions Committee in this quarterly Administration Review report.