Denise Le Gal considers the future of shared services and data cleansing in LGPS, having formerly chaired Surrey Pension Fund which provided pensions administration solutions to fellow local authorities.
The LGPS already has quite a few examples of administration shared services. In the future we may see much greater collaboration on shared services and pensions administration. This is not only because of a desire for efficiencies but, equally important, because of the need for data cleansing that can have a significant impact on reducing liabilities and allow better service provision to the member beneficiaries and employers.
A study has shown that having clean data reduced one fund’s liabilities by a significant 5%.
On the other hand, you only need to see the recent announcement from HMRC on pension miscalculation, following the review of Guaranteed Minimum Pension (GMP), to realise the impact that poor data can have and the long-term implications for recipients of pensions.
Some funds, and a pool, are already doing this and have made significant savings.
The example I know best is the Surrey Pension Fund which joined forces with East Sussex to create Orbis, combined shared services collaboration.
They also integrated the pensions administration function for the London Tri-Borough. This presented an opportunity to ensure only clean data was introduced to the system — hence greater accuracy and efficiency.
Another reason to consider collaboration on pension administration is the scarcity of resource as well as the recruitment challenges that are currently prevalent in both the public and private sectors.
The PLSA and Aon will each be issuing reports on this soon.
Combining resources and training from within can deliver both cost savings and resilience pension administration teams for the future.
Joining forces presents other advantages, including reduction of duplication; management delayering through integration; sharing of best practice and joint learning; opportunities for joint investment on processes and systems that would be impossible for a single authority; efficiencies from joint procurement, and opportunities for managing growth.
With increasing pressure from regulators on communication with beneficiaries, accurate and timely reporting and greater transparency, it is essential that funds consider the most effective and efficient way of meeting these extra demands. It simply makes sense to consider collaboration among funds and, or, pools.
Shared administration and clean data will provide better information for actuarial valuations and in turn inform individual funds’ investment strategies.
Better alignment between asset and liabilities can only mean better governance, greater efficiency savings and reduced liabilities. All of these will help to ensure we have an LGPS that is fit for the future to deliver pensions for many generations to come.
Denise Le Gal is former chair of the Surrey Pension Fund and currently serves at the independent chair of Brunel Pension Partnership.
Denise writes in a personal capacity and her views are not necessarily those of the Brunel Pension Partnership or of the Scheme Advisory Board.
