Agenda item

(To receive a report by Jo Ray, Pension Fund Manager, which gives an overview of the issues between the employer in the Fund (LCC) providing the necessary information to the Fund's administrator (WYPF) and invites LCC to give the Board a presentation on how these issues were being addressed)

Consideration was given to a report from Jo Ray (Pension Fund Manager) which gave an overview of the issues between the employer in the Fund (LCC) and the provision of necessary information to the Fund's administrator, West Yorkshire Pension Fund (WYPF).

Jo Ray (Pension Fund Manager) introduced the report and explained that it had been reported at the last meeting that the Fund's largest employer, LCC, had developed a backlog in providing detailed leaver information to the Fund's administrator.  The Board requested that the Pension Fund Manager meet with all parties (LCC, Serco, WYPF and the Fund) to discuss the issue in detail.

It was confirmed that this meeting had been held in November where it was agreed that Serco would work with WYPF to ensure that current leavers were dealt with correctly at the point of leaving and develop an improvement plan to address the backlog.  LCC also agreed to improve the monitoring process of the situation and to provide update reports on a monthly basis once the improvement plan had been implemented.

This issue had been logged on the breaches register but not, at this stage, reported to the Pensions Regulator on the understanding that an improvement plan would be implemented.

The Chairman welcomed Vicki Sharpe from LCC and Debbie Eldridge and Graham Morgan from Serco to the meeting and invited them to provide assurance that the situation was improving and that LCC were monitoring performance across all areas of the payroll contract to ensure that the statutory responsibilities of the employer were being met.

Debbie Eldridge confirmed that Serco had handled the backlog as an emergency, employing an additional member of staff to oversee the completion of the process.  It was reported that this work was now on track to deliver to the plan agreed, with more than 200 forms submitted to WYPF last week.  It was also advised that this work was an area of priority and that the problems had stemmed from the implementation of the Agresso system in 2015 and its reported inability to produce the complex data required.  It was explained that changes were often necessary due to the problems with the system which started in 2015 although it was expected that the issues encountered 2015, 2016 and 2017 would be resolved by April 2018. 

Vicki Sharpe reported that these issues formed part of the overall payroll and data issues which had been included on the Council's Risk Register and were being discussed at the highest level of the Council.  Pete Moore, Executive Director of Finance and Public Protection, was the Scheme Manager for this work.  A Project Governance and Assurance Board had also been established to ensure that all relevant managers were working towards the resolution of these issues. 

Yunus Gajra (Business Development Manager, WYPF) confirmed that information had been received from the payroll provider but that the quality of this information had been questionable. It was reported that WYPF had no confidence in the quality of data being presented.

During discussion, the following points were noted:-

·       Due to recent experience, WYPF confirmed that they had no confidence that data received would be correct.  Serco representatives indicated that they could not give complete assurance that information provided to WYPF would be correct although it was expected that most data from April 2018 onward would be accurate following the system upgrade;

·       The Board expressed concern that assurance could not be given that future data would be 100% correct.  This could cause significant reputational damage for both WYPF and LCC and was unacceptable;

·       The Board was also concerned that LCC, as the employer, appeared to be acting reactively to these issues rather than proactively;

·       It also appeared that there was little understanding of the employers responsibilities for pensions set by The Pensions Regulator (TPR) or that these responsibilities may not seem to be a priority;

·       Vicki Sharpe advised that there had been little stability due to the turnover of staff within Serco but now that this had been addressed, the situation appeared to be stabilising.  It was also reported that guidance would be appreciated as the team were learning 'on the job'.  This also raised concern for the Board;

·       Clarification was provided that LCC had contracted to deliver a full payroll system, including pension deductions, and this contract was awarded to Serco following a thorough procurement process.  Unfortunately, to-date, this service had not been delivered to the level of the contract;

·       It was confirmed that all employers within the scheme where Serco managed their payroll had been affected by the issues, including schools;

·       LCC had been advised by Serco that there were 83 pension issues as a result of the Agresso system.  It had then been agreed to prioritise and rectify the top 18 which included issues with the Fire Pension Scheme;

·       Although payroll issues had been reported at the relevant Council meetings, the specific impact or severity of these issues for pensions had not been reported to the Pensions Committee or the LGPS Local Pension Board.

·       Serco were unable to provide a date for when all the data for 2015, 2016 and 2017 would be correctly calculated which increased the Board's concern;

·       Serco confirmed that all data going forward would be accurate from April 2018.  A mirror system had been set up to calculate data from Agresso and all this data had been completely correct for pensions.  As a result, Serco confirmed that they confident that this data was accurate and up-to-date;

·       The Board requested actual figures of those employers and employees affected by these issues.  It was confirmed that this data had been provided to the Corporate Management Board and would be circulated after the meeting;

·       It was indicated at a previous meeting that there was an expectation that approximately 10% of the files may be incorrect.  However, it now appeared that there was significantly more than 10% and the Board requested an indication of the actual scale of the problem.  Serco indicated that until their specialist consultants had completed the review of the system and could understand what had gone wrong, a full assessment could not be undertaken.  It was reported that this work should be complete in time for April 2018;

·       The Board noted that WYPF had factored in a 10% error margin but reported that they would not be prepared to process any higher as it would incur extra work, cost, disruption to members and reputational damage to WYPF.  It was also noted that WYPF had an obligation to other employers within the fund and not just LPF.

The Chairman thanked representatives from LCC and Serco for providing an update to the Board and stressed that the situation faced in relation to pensions was extremely serious and must be rectified as soon as possible.  Before the representatives left the meeting, the Chairman reiterated the request for information by the Board during the discussions which was expected to be circulated following the meeting.

Discussion continued and the Board agreed that the level of the issues were greater than anticipated.  Not only was the backlog greater with no clear date for rectification but the accuracy of the data presented to WYPF gave greater concern. 

LCC and Serco were unable to give any assurance that data being sent to WYPF would not need to be resent should errors be found or that data would be correct going forward due to ongoing system cleaning.  Consequently, the Board did not feel confident that LCC would be able to clear any backlog in the agreed timescales.  Additionally, the Board was concerned that LCC was not undertaking appropriate monitoring of its payroll provider to ensure that it was meeting all the pension related requirements set out within the LGPS Regulations.  Therefore, the Board was minded to report LCC to The Pensions Regulator.

However, the Board agreed to write to LCC, in the first instance, advising that they would be allowed one month to provide further assurance that the process of clearing backlogs in LGPS pensions related data was being sufficiently managed and that, as an employer of the fund, LCC was meeting its responsibilities to the Pension Fund as set out in the administration strategy. 

The Board also agreed to hold an additional meeting of the LGPS Local Pension Board on Tuesday 27 February 2018 at 2.00pm where LCC would be required to provide assurance and also to present a clear, ongoing, monitoring and reporting plan.  Should the Board remain dissatisfied with the progress, there would be no option but to report the employer (LCC) to The Pensions Regulator.

RESOLVED

1.    That the report and improvement plan be noted;

2.    That a letter be sent to Lincolnshire County Council advising of the Boards dissatisfaction with the progress in relation to the backlog of Leavers Information; and

3.    That an additional meeting of the LGPS Local Pension Board be arranged for Tuesday 27 February 2018 at 2.00pm.

At 11.35am, the Chairman adjourned the meeting and reconvened at 11.40am.