Hundreds of workers enrolled in the Cornwall Pension Fund could be due a rebate after an administration error saw Cornwall Council overcharge them for their pension contributions.
The issue, first reported by Cornwall Live, arose from staff receiving extra payments such as overtime, which cause their contributions rise accordingly. Payments into the fund were not readjusted once that temporary increase in pay ended.
Dated systems often result in a lack of automated processes, but where that is the case, reconciling data and tightening controls are even more important
Matt Dodds, ITM
Cornwall Council instigated a review of its system when, in March of this year, a woman contacted it to query whether she had been overpaying. It was found that she had, and that several other similar complaints had been logged and resolved individually prior to March 2020, but without sparking a full review.
The council is now reviewing all payments made since 2014, amid warnings that besides its own direct employees, former employees and other organisations that use the council’s payroll services may have been affected.
In a statement, a Cornwall Council spokesperson told Pensions Expert that the issue is thought to have arisen in 2014 “when we switched from calculating pension contributions annually to monthly as part of a new policy implementation”.
The council estimates around 500 members of staff were affected in 2019-20, overpaying an average of £60 each.
The spokesperson said that as soon as the issue was highlighted, the council took a number of steps, including commissioning an external review of its system for calculating pension contributions by the Chartered Institute for Public Finance and Accountancy.
Additionally, the council “immediately made changes to the Oracle Cloud system to correct the calculation method, and this now ensures pension contribution bandings are no longer adjusted in the month that temporary additional payments are made”, the spokesperson continued.
As well as strengthening its operational standards and controls, the council has begun restitutive work for the estimated 10 per cent of its workforce who were affected.
“[They] will be contacted by the end of March 2021 to let them know the amount of money involved, and details of how it will be repaid. This will also involve finding those people who are affected but are no longer employed by the council,” the spokesperson said.
Council in the dark
As reported by Cornwall Live, the discovery of the error irked members of Cornwall Council, who were left wondering how an issue reported some time ago had not been investigated properly.
Audit committee chair David Harris said: “Clearly people have queried the issue before March 2020. They queried it, it was corrected and they received repayment. Why did nobody ever flag it and say, ‘have we got a problem here?’.”
Chris Butters, an independent member of the audit committee, criticised what he termed “a large failure of process”. He told committee: “This is something that could have irritated a lot of people, but the post mortem is entirely forward looking with no retrospective recognition that somewhere in this there is a failure.”
Data errors not uncommon
Commenting on the case, Matt Dodds, director at ITM, told Pensions Expert it was not uncommon “for data errors such as this to creep into administration operations”.
“Dated systems often result in a lack of automated processes, but where that is the case, reconciling data and tightening controls are even more important,” he said.
“Poor data oversight and lack of controls almost always leads to inefficient administration and governance. The issues can be compounded where consistent monitoring and quality checks are not in place, such as those highlighted within this case.”
Premier’s head of administration, Girish Menezes, pointed out that although every error has specific underlying causes, this particular case “could reflect an issue in process, either at the council end, as sponsor, not sending the appropriate data across; or the administration team not reflecting the changes in their systems”.
“The situation may have been further exacerbated by individual member errors not being escalated within a formal complaint and error mechanism, which would have resulted in a root cause analysis, lessons learned and an appropriate rectification plan, all of which should have been discussed with the trustees,” he continued.
One in five teachers may have incorrect pension entitlements
One in five teachers may be at risk of receiving incorrect information about their pension entitlements, with discrepancies also likely to be found in other decentralised public sector pension schemes with multiple employers.
“Administration governance is a critical component for trustees, and the Pensions Regulator is quite focused on this for schemes of all types and sizes.”
