Hackney fines employers to improve admin

The London Borough of Hackney Pension Fund has been charging employers for submitting late or inaccurate data, showing one way to increase efficiency in multi-employer schemes.

The amount charged is equal to the additional administration cost to Hackney Council caused by defects in the data. 

Jill Davys, head of financial services at Hackney Council, said: “Good quality, accurate, timely data helps to reduce overall costs of pension administration and ensures members receive the benefits they are entitled to."

The £845m fund has 21 employers and 17,993 scheme members. 

Other multi-employer schemes have been using employer forums and focus groups to encourage good practice when data handling. 

Hackney's charges

The scheme fines employers if they miss deadlines for submitting data.

Schemes should look very carefully at their expenses rule for the additional cost

Robert West, Baker & McKenzie

Davys said the additional cost of administration could be recharged and was only used as a last resort.

“Support and training is provided to assist employers to meet deadlines,” she said. "Fines sound perhaps a little bit draconian, but why not?"

She said schemes looking to follow suit should put clear policies and procedures in place and explain the importance of clean data and training strategies so employers understand their responsibilities.

“The incentive has prompted employers to take up our offer of training in providing accurate and timely data on members,” she added.

Trustees must check whether their scheme rules allow them the power to impose such charges as an expense of running the scheme.

"As long as the power is in the rules, I see nothing wrong," said Robert West, partner at Baker & McKenzie.

“That would be the natural way of doing it. How much does it cost, in terms of additional administrative cost, in order to put it right?” 

West said he would expect a multi-employer scheme to give schemes the power to impose the costs selectively.

A more severe alternative is to impose a fixed penalty on non-compliant employers. This is not classified as an expense, so would depend on whether schemes have sufficient power specified in the rules.

Fines sound a little bit draconian, but why not?

Richard Butcher, Pitmans

“Schemes should look very carefully at their expenses rule for the additional cost, and at their employer contribution rule to see whether a fixed penalty could be included,” West said.

Richard Butcher, head of trustees at Pitmans, said single-employer pension schemes faced similar issues and advised schemes to clearly set out expectations at this point. 

“The agreement will include the date by which data should be submitted, how to inform the scheme about new entrants and how many days in advance the scheme should be notified about leavers,” he said.

“Fines sound a little bit draconian, but why not?” 

Using employer forums 

Schemes can also use employer forums to encourage good practice when handling member data. 

Northamptonshire and Cambridgeshire pension funds used forums and focus groups when they merged to form the Local Government Shared Services in 2010. 

The merger also inspired an administration service software update, allowing employers to update their own records online.

It also led to focus groups and more user-friendly member communications.

Steve Dainty, head of pensions at the LGSS, said the number of administration staff had decreased from 78 to 50 and estimated the changes have saved £500,000 a year. 

Dainty advised schemes: “Endless rounds of consulting are not the way forward. Try it, implement it and tweak it.

"Sometimes you do have to follow proper procedures, I understand. But there are times when you can shortcut it.”

The employer forums were held over the course of a day, where representatives discussed issues directly.