Lincolnshire fund enters admin-sharing deal with West Yorks

In January, the London Pensions Fund Authority announced a £500m tie-in with Greater Manchester Pension Fund for infrastructure investments, while other council funds have joined forces to share administration services, in an effort to take advantages of cost efficiencies. 

Lincolnshire’s existing admin provision was bundled together in a 15-year council contract for back-office services and is due to come to an end this month.

The £1.7bn fund decided to explore the option of hiving off the administration and combining it with that of another local authority to generate cost savings and other efficiencies.

Jo Ray, pensions and treasury group manager at Lincolnshire, said: “[If] you go with another contractor, there is always a profit line that then has to be fed, and working with a local authority you’re actually all working from the same page.

“We know exactly what we want; all efficiencies are put back into the pension fund rather than to shareholders, for example.”

There’s so much commonality between the operation of a local government pension scheme, between one administrator and the next

Daniel Taylor, Premier Pensions

Lincolnshire’s current annual cost per head for administrating the scheme for its 67,000 members is around £19, Ray said.

The partnership is expected to bring this down to around £15-£16 per member over the next few years.

Lincolnshire began to seek interest in 2013 before narrowing the shortlist to six local government pension funds.

It settled on WYPF due to its size and the fact it had an integrated admin and payroll system. The new system will go live on April 1.

Daniel Taylor, head of administration services at Premier Pensions, said such partnerships for local authorities have “really got legs”.

“There’s so much commonality between the operation of a local government pension scheme, between one administrator and the next,” Taylor said.

“If they can share resources and they have the technical infrastructure behind them, then it offers far more resilience in terms of resourcing [and] service provision.”

However, Karen McWilliam, head of public sector benefits at consultancy Aon Hewitt, said it is crucial to first establish the ground rules and where “a bit of give and take will be needed”.

She added: “While gains will often be most readily realised where there is a common set of systems and processes used by both partners in providing the service, those looking for potential partners should not underestimate the need for there to also be a cultural fit.

“However, if the partnership can be made to work, as with any collaborative arrangement, stakeholders should also benefit from additional quality or efficiency improvements simply as a result of shared thought and ideas.”

Not just about cost 

Ray said the move was not just about cost savings and the scheme was looking for “additional resilience” across the management of the scheme, to benefit its approximate 67,000 members. 

She added that Lincolnshire’s tie-in is different to other admin partnerships in terms of how each scheme distributes the costs. 

“We are doing it as a truly shared service in that the cost of the admin will be shared proportionally across the membership of those funds,” she said. “All costs and all efficiencies will be shared... which is what I think a proper shared service should be.” 

Ray said that it would also consider collaborating on governance or investment in the future. 

Taylor said the partnership also provided opportunity to deliver a better service for the members. 

“All round I think there’s likely to be cost savings, but also there’s likely to be some improvement in terms of member services,” he said. 

He added that, more broadly, the sector could see an extension of the idea in which “super admins” take on the administration of smaller schemes.