Teething issues following an administration overhaul at South Yorkshire Pensions Authority has delayed the delivery of members’ annual statements, amid a challenging backdrop of wider fundamental reform across the Local Government Pension Scheme.
The Barnsley-based fund warned members about the delay to their annual statements on its website this week after it failed to meet the August 31 statutory reporting deadline.
If your systems aren’t up to scratch or the member data is not, you’ve not got a hope in hell of meeting that time scale – we haven’t met it this year
Gary Chapman, South Yorkshire
Gary Chapman, head of pension administration at the fund, said a system overhaul completed at the end of 2014 to a very tight deadline had caused knock-on problems throughout the year.
The fund’s previous supplier decided not to participate in a procurement process for a new admin framework, which was finalised at the end of 2013.
South Yorkshire was given 12 months’ notice to transfer its administration database, payroll, workflow, imaging and accountancy onto a new system, meaning that implementation had to be completed within a fixed time period.
Chapman said: “We went live with something that basically wasn’t ready – we didn’t have enough time to do everything… so we have since been recovering that position. It has caused us to have backlogs of work where we didn’t use to have [them].”
Chapman said the fund’s administration was 75 per cent back to normal after tackling ongoing “teething problems” with the new system, and had prioritised all time-sensitive work relating to member retirements and deaths.
Mounting pressure
Chapman said the 2014 LGPS changes combined with ongoing legislative change was challenging the day-to-day work of administrators across the scheme, irrespective of problems with new systems or suppliers.
“The new rules require you to provide the member with a statement of their pension account by the end of August. With 330-odd employers all feeding in their member data… we have to reconcile that all within a four-month timescale,” said Chapman.
He added: “If your systems aren’t up to scratch or the member data is not, you’ve not got a hope in hell of meeting that time scale.”
Barry McKay, partner at consultancy Hymans Robertson, said South Yorkshire was not alone among LGPS funds in missing the statutory deadline.
“Administrators are dealing with all these changes while managing probably with limited and ever-decreasing resources,” he said.
“We’ve been trying to encourage funds to try and use technology a bit more to help them with the fact they’ve got less people to do more,” he added.
A spokesperson for the Pensions Regulator said public service schemes must be governed and administered in accordance with the requirements of the law.
“However, the Pensions Regulator recognises the significance of the public service pension reforms, which include benefit redesign and new requirements about governance and administration,” the spokesperson added. “Scheme managers, pension board members and those involved with administering the scheme, among others, must report certain breaches of the law to us.”
Chapman explained the extenuating circumstances meant that in the eyes of the regulator the scheme was not deemed to have breached the rules, but was told they would have to report next year.
The case for separation
Steve Simkins, head of public sector pensions at consultancy KPMG, said the LGPS scheme advisory board is currently looking at options for further separation from the local authority umbrella, a move being driven by concerns over budget-setting conflicts.
Pension funds need to be treated like pension funds when it comes to budgeting and resourcing – taking into account the actual needs of members and employers and the demands of changing legislation.
Steve Simkins, KPMG
Simkins said: “Pension funds need to be treated like pension funds when it comes to budgeting and resourcing – taking into account the actual needs of members and employers and the demands of changing legislation.
“That might lead to a result that says budget cuts are not appropriate despite the fact that is not in line with what’s having to be enforced within the local authorities themselves.”
Simkins said more resources are needed for administration teams dealing with the competing demands of scheme changes, annual and lifetime allowance changes, guaranteed minimum pensions reconciliation and new annual benefit statements – alongside a general upturn in interest from members.
