Data poses difficulties to Surrey admin outsourcers

The Royal Borough of Kensington and Chelsea will revert to running its own functions from April 2021, concluding that it will be able to handle member requests faster on its own. It brings to an end a contract that ran above the national and London average for costs.

A scoresheet of key performance indicators for the contract showed that while Surrey’s service greatly improved over the past two years, administrators had struggled to meet expectations initially. In September 2018, the council service achieved 100 per cent on less than half of Kensington and Chelsea’s administration KPIs, and scored just 22 per cent on quote estimates for members transferring in. 

The borough says that KPI issues did not drive its decision to switch provider, but adds that speed of processing requests is a key factor.

"We are confident that Surrey met its statutory responsibilities when administering our pension scheme, but we have taken the decision to bring the administration responsibilities back in-house from April 2021 to deal with individual casework faster for our members,” a spokesperson from the fund says.

Meanwhile, council minutes reveal that Surrey has struggled with data issues – often inherited from previous administrators – at its other contracts. The south-eastern county currently provides outsourced services to the London boroughs of Hillingdon, Hammersmith and Fulham, and Westminster, as well as looking after its own LGPS fund.

Hammersmith and Fulham, Kensington and Chelsea, and Hillingdon all previously held contracts with outsourcer Capita, since 2011, 2007 and 2012 respectively.*

Problems over staff shortages

Since switching, each of the funds has had several problems with its administration. Data issues have overwhelmingly been tracked to information from Capita, while Surrey has been criticised for staff shortages. 

Documents from Hillingdon council, whose contract with Surrey is up for renewal in April next year, observe difficulties with staff shortages and data, especially that of deferred members.

Although improvements in KPIs were noted over time, Hillingdon expressed interest in an internal audit being carried out at a meeting in October last year, before ultimately deciding against it. 

Hammersmith and Fulham held an “extraordinary meeting” in March on Surrey’s service, but did not disclose the subject matter. In January, it said there were still problems with deficient data, and that a revised data improvement plan was being created with Surrey.

The fund ended its agreement with Capita “through mutual consent” in 2015, after the service provider failed to meet targets. The move led to delays and inaccuracies with the transfer of data between managed services provider BT and Surrey.  

Staff shortages, new legislative requirements and implementing a new online pension system are all mentioned in Westminster’s 2018-19 annual report, although it says there were no delays in processing pension payments and that final calculations were all accurate. 

Administration costs for these funds remained below the London-specific average, although above the national average, according to council documents.

Separating the present from the past

Surrey has taken on board the criticisms by its clients. Although its head of pensions administration resigned in January, the provider assured Hillingdon that interim measures are in place and that filling the post is a priority to maintaining momentum. The role was described as “key” in overseeing the service improvement programme. 

Regarding further staffing issues, an expansion of Surrey’s team was noted by Hillingdon, which also saw “a significant improvement” in KPIs after it started differentiating between legacy issues that result from Capita’s data, and other problems linked directly to Surrey, in July last year. 

Minutes from a March 2019 meeting regarding a late payment state: “This was a failing by Capita, not Surrey County Council. It was vital that Surrey did not repeat the mistakes of Capita.” 

A spokesperson from the fund says: “Both Hillingdon and Surrey aim to continuously improve service delivery and data quality. There are a number of initiatives in place to achieve this, such as a data improvement plan.” 

Kensington and Chelsea switched from quarterly to monthly KPI monitoring, allowing Surrey to identify and resolve issues earlier. “The change to monthly monitoring of KPIs has proved successful, and overall the performance against KPIs has shown an improvement since September 2018,” documents from the fund state. 

As with Hillingdon, filtering out problems due to Capita’s legacy data (or a lack of employer data) improved Surrey’s KPIs.

More resources are being directed to solving queries at first point of contact and creating a specialist team to deal with transfers, after Hammersmith and Fulham specifically requested this. 

For its own pension fund, for which it also carries out the administration, Surrey notes a “significant improvement in the quality of the data, which is a result of the efforts of the data cleanse leading up to the submission of the triennial valuation data”.

Admin is becoming more complex

Bart Huby, partner at LCP, says: “Administration of LGPS funds has become vastly more complex and demanding in recent years, with significant changes to LGPS benefits introduced first in 2006, and then the major move to a [career average revalued earnings] arrangement for future service benefits in 2014.

“As a result, we’ve seen increasing numbers of ‘shared service’ arrangements where one local authority takes on responsibility for administering a number of LGPS funds, enabling both cost efficiencies and greater focus of expertise.” 

Data issues can be compounded by the use of different systems over the years, alongside the sheer volume of data held by the LGPS, which deals with many members across different employers and local authorities.  

“Limitations in data quality once recognised are often one of the key reasons for changing administrators, so it’s quite likely that this had been picked up prior to the handover,” Mr Huby says.

He notes there is now a looming “crunch point” in the resolution of the McCloud age discrimination case and direction on how LGPS need to implement compensation for affected members, and the subsequent implementation of the outcome of the cost cap mechanism review. Schemes will need good quality data to begin implementing changes resulting from the case. 

“This will be a major exercise, and fund administrators holding poor quality data are likely to find this particularly challenging,” he adds.

Digitising and improving records can be a huge task, something many schemes are not willing to pay for, according to David Davison, from Spence & Partners. 

He says that consolidation is likely to continue for local authorities looking to reduce costs, as long there is a commitment to improving efficiency.

“If not, funds may need to look at other alternatives such as providers who can offer more automation, better member communication and more up-to-date technology,” Mr Davison says. 

*This article has been update to correct an inaccuracy in the reporting of Westminster's previous contracts for administration.