Isle of Wight Pension Fund is tendering for pensions administration software as its current infrastructure is set to be decommissioned, in a move expected initially to cost up to £267,000.
Local government reforms have changed the way schemes calculate benefits, meaning they have to run career average calculations alongside those for the final salary benefits, increasing complexity.
The decommissioning process of our existing software at the end of this year has brought the need for this process forward
Isle of Wight Pension Fund report
The fund said it had planned to wait until this year’s reforms to the Local Government Pension Scheme had bedded in before seeking to replace its software, but was forced to accelerate plans after admin software provider Heywood announced it would decommission its current system on December 31 2014.
Isle of Wight stated that implementing the new system is expected to cost between £93,000 and £267,000, with annual fees of between £25,000 and £70,000. The maximum total cost of the contract over seven years is expected to be around £750,000.
A committee report from the council on the replacement of the software pointed to a significant number of legislative developments in relation to pension admin.
The report stated: “It was intended that these changes were embedded into usual practice before the council pursued a new procurement to deliver this function. But the decommissioning process of our existing software at the end of this year has brought the need for this process forward.”
Mark LeCompte, group client director at pensions software company Aquilaheywood, the parent company of Heywood, said it announced in September it would stop supporting the scheme’s current admin software Axise. He added: “For those who hadn’t moved, it made sense to migrate to the new system.”
The fund opted not to use a national framework for admin software procurement set up by Kent County Council and other local authorities in 2013, as this was expected to exclude the current provider.
Isle of Wight also decided against partnering with Hampshire County Council to provide the service, concluding a tendering exercise was likely to be cheaper.
The LGPS reforms came into effect from April of this year, making it a career average scheme for all benefits accrued from April 1 2014.
“It means creating a new set of benefit calculations for the scheme,” said LeCompte. “It’s a significant amount of work.”
The new benefits system requires holding more comprehensive records on members of the scheme.
“You need records related to each and every year because it’s related to career average,” said Mark Packham, public sector pensions leader at consultancy PwC. “It becomes a fundamentally different ball game.”
The requirement for schemes to continue to run the previous benefits system also increases the complexity, Packham said.
