Poor quality pensions data at the London Borough of Barnet Pension Fund have sparked concerns that the scheme’s triennial valuation could be derailed or delayed.
Over the past few years, the pensions administration service provided by outsourcer Capita to Barnet Council has come under scrutiny.
The more poor data you have, the bigger that assumption gets, and the further away you get from the actual known liability position, which could involve employers, sponsors paying more than they have to
Daniel Taylor, Trafalgar House
In 2017, the Pensions Regulator said it had fined the Local Government Pension Scheme fund £1,000 for failing to submit its 2016 scheme return on time.
And last year the council reported itself to TPR after failing to produce 447 pension benefit statements on time.
More recently, concerns have been raised about the scheme’s recent data report and the effect poor-quality data could have on the pension fund’s actuarial valuation and employer contributions.
A document from a March 26 pensions committee meeting on the planning of the fund’s 2019 actuarial valuation stated: “The completion of the valuation requires that the actuary receives timely and accurate data covering fund values, cash movements – contributions and benefits – and the service records for each employee.”
Data review reveals 'critical errors'
The valuation, which is due to commence on March 31, will determine the contributions payable by each employer.
However, the fund is still experiencing problems with data, and inaccurate data could have a big effect on required contribution rates.
While Capita has a data-improvement plan in place, the minutes reveal that the watchdog, auditor and actuary have all expressed concerns over the quality of the membership data.
According to the document: “Any errors in the provision of the data could have a significant impact on the required contribution rates, particularly for the smaller scheduled and admitted bodies.”
The results of a data-quality report carried out by the scheme actuary and presented at the recent meeting highlight a substantial number of “critical errors” the administrator must tackle before actuarial calculations can begin.
Barnet Council is "holding Capita to account” by monitoring progress using a third-party tool, a further document stated.
It added that Capita will upload data to the scheme's portal by the end of the month, and this will provide Barnet with an update.
Union calls for in-house admin
John Burgess, branch secretary at Barnet Unison, said: “The councillors know that Barnet Unison is deeply unhappy with the pensions administration service and the increasing problems with it.”
Unison is calling for pensions administration to be brought in-house. “All we’re hearing is regular excuses from Capita,” Mr Burgess added.
“One of the risks identified in the council reports is that it could have an impact on employer contributions. That means it’s not just the administration, it’s about the future of the services.”
Hiking up employer contributions could mean the services provided by the council go underfunded, shrink in scope with or stop altogether, according to Unison. It also said redundancies could result.
A Capita spokesperson said: “Capita takes its responsibilities for pension data quality extremely seriously and has made substantial progress with improving and clarifying historic data discrepancies.”
The spokesperson added: "The council’s actuary has confirmed significant progress, with the number of data validations required reducing by 76 per cent to date. We are working with third-party payroll providers to glean any missing information and we will update the remaining records during April.”
Making assumptions
If actuaries are concerned about the quality of the underlying data, they will usually add a margin of prudence into their assumptions to accommodate data inaccuracies.
This could mean that participating employers may have to pay contribution rates that are not directly related to the underlying liabilities.
Barnet in TPR breach as Capita misses payments
The London Borough of Barnet Council has reported itself to the Pensions Regulator after failing to produce 447 pension benefit statements on time.
“In my experience, actuaries only ever make more conservative assumptions when they’re looking at data,” said Dan Taylor, director at third-party administrator Trafalgar House.
“The more poor data you have, the bigger that assumption gets, and the further away you get from the actual known liability position, which could involve employers, sponsors paying more than they have to,” Mr Taylor added.
Labour councillor Alison Moore, who sits on the pensions committee, said: “We have as much as six years’ worth of bad data within the system,” adding that this is a major risk.
She noted that an independent consultant has been hired by Barnet to drive an improvement plan over the past few months.
However, Ms Moore added: “We’re at the eleventh hour trying to plug data holes, and I think that’s frankly shocking.”
