L O C A L P E N S I O N S P A R T N E R S H I P ... · Our service consistently exceeds Service Level Agreements and we take a proactive approach to changing administration ... L

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Practitioner Conference

L O C A L P E N S I O N S P A R T N E R S H I P

London Borough of Newham

London Borough of Brent

Agenda

• Administration Update – James Curtis, Pensions Administration Operations Manager

• Ill Health Retirement Process – Ammie Mchugh, Engagement Officer

• LGPS Technical Update – Neil Lewins, Lead Technical Specialist

• Lunch

• Importance of Data – Janet Kelly, Pensions Administration Operations Manager - Data

• Engagement Update & My Pension Online Session (for those who want to stay) – Jonathan Howarth, Engagement Officer

• Close

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Pension Administration Update


London Borough of Newham

London Borough of Brent

4

employees

300+ 600,000+ 1,800+

pension fund

members across

LGPS, Police and

Firefighter schemes

(17)

public and charity

sector employers

LPP was launched in April 2016 as a collaboration between the Lancashire County Council (LCC) and London Pensions Fund Authority (LPFA).

Today we manage around £18.4 billion of pensions assets for our investors and provide pensions administration services for more than 600,000 LGPS, Police and Firefighters’ pension scheme members across over 1,800 employers.

We provide first-class end-to-end pensions administration services including payroll, and member and employer engagement. Our service consistently exceeds Service Level Agreements and we take a proactive approach to changing administration requirements across the sector.

We place a strong emphasis on building effective and collaborative working relations with our clients.

LPP at a Glance

Who we work with

6

We manage all pensions administration including processing new starters, transfers, leavers, retirements and deaths. 3 locations; Preston, Havering & Hertfordshire

Pensions Administration

Our Contact Centre in Preston takes all incoming telephone calls to the member helplines and is the first point of contact for incoming e-mail enquiries

Contact Centre

We ensure that we meet all regulatory requirements, e.g. issuing of Annual Benefit Statements and P60s

Regulatory Requirements

Pensions Administration Overview –what we do

Our data team ensures member records are up to date and correct. They manage data submissions for the Fire Valuation

Data & Payments

Dedicated business development and improvement team continuously identifying and delivering improved ways of working

Business Improvement

Specialist team delivering member and employer engagement. They issue regular newsletters and organise engagement meetings and member and employer forums

Engagement

7

We pay over 156,000 pensioners over £80m, and put

650 new pensions into payment

Pension Administration – In Numbers

£80m

25kWe process over 25,000 pensions administration cases,

including over 2,000 new starters and 900 leaversInsert

LPP

stock

image

Every month across the 17 LPGS and blue light schemes we

administer…

We receive over 10,000 calls and over 11,000 emails

into our Contact Centre10k

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Contact Centre Performance

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Overall satisfaction 74%

Overall satisfaction 98% satisfaction (call handler) and 83% (overall service)

Contact Centre Call Handling

Overall satisfaction 71%

Email

MEMBER

EXPERIENCE -

SURVEYS

Retirements

Overall satisfaction scores from December 2019

Email Overall Rating

Number of respondents 54 23 8 9 9

Percentage of respondents 52% 22% 8% 9% 9% Satisfied

Telephone Overall Rating

Number of respondents 1502 254 55

Percentage of respondents 83% 14% 3% Satisfied

LPP Standard Email Quality Overall Rating

Number of respondents 360 48 98

Percentage of respondents 71% 9% 19% Satisfied

10

Member and employer

focused service

Demonstrate high quality service

via quantitative and qualitative

measures. Cost effective

provision ensures financial viability

and is endorsed by recognised

industry benchmarking.

Harness technology

Utilising innovative technology

to provide first-class service

and increase member

engagement. Disrupt the

market.

Expert in public

sector pensions

Leading administration

collaboratively across the

public sector. Provider of

choice. Specialist in LGPS and

blue light.

Robust risk and

compliancePro-actively manage business

risk and compliance. Ensure

compliance with COP14 and

TPR

Strategic ObjectivesHigh quality, cost effective pension administration

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1

Questions?


121

2

Ill Health & the LGPS


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Agenda

• Ill health – Intro & key definitions

• Tiers

• Role of the Employer

• Role of IRMP

• Role of LPP

• The process

• Tier 3 Reviews

• Ill health – Deferred members

• Cost

• Appeals

• Questions

For Professional Clients in the UK only

To understand your role as

an LGPS employer in the

process of awarding ill health

benefits…

Risk warning, To be successful, marketers should understand the life cycle of a product.

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Ill Health - Intro

Ill health benefits can be taken from any age in the scheme, employers must seek an

opinion from an IRMP during the process of an ill health retirement, but ultimately the

decision to pay the benefits on the grounds of ill health and under what tier lies with

the employer.

For Professional Clients in the UK only

Active Members

Tier 1 - fully enhanced

Tier 2 – 25 % enhancement

Tier 3 – unreduced benefits

Deferred Members

No tier system, benefits paid

unreduced.

Date paid from depends on

the date the member left the

scheme

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Ill Health - Definitions

IRMP - Independent Registered Medical Practitioner

Permanently incapable – they will, more likely than not, be incapable until, at least the members normal pension age (state pension age).

Gainful Employment – Paid employment for not less than 30 hours each week for a period not less than 12 months.

Deferred Member – An employee who has stopped paying into the scheme and has a ‘frozen pension’.

NPA – Normal pension age, which is in line with state pension age or 65 if this is later

SPA – State Pension Age

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IRMP Criteria

IRMP means an independent registered medical practitioner who is registered with the General Medical Council and –

(a)Holds a diploma in occupational health medicine (D Occ Med) or an equivalent qualification issued by a competent authority in an EEA state; and for the purposes of this definition, ”competent authority” has the meaning given by section 55(1) of the Medical Act 1983; or

(b) Is an Associate, a Member or a Fellow of the Faculty of Occupational Medicine or equivalent institution of the EEA state

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Vesting Period

To be eligible for ill health retirement a member must have met the vesting period in the scheme:

✓2 years calendar length service

✓Another deferred record

There are other ways in which a member can meet the vesting period. If you are in doubt please contact LPPbefore considering ill health retirement

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Ill health retirement - active members✓Member was an active member immediately prior to termination of employment

✓Member has met the scheme’s 2 year vesting period

✓Member’s employment is terminated by their employer on the grounds off ill health or infirmity of mind or body

✓Termination takes place before NPA

✓The member is permanently incapable of discharging efficiently the duties of current employment

✓The member is not immediately capable of undertaking any gainful employment

If member satisfies the above criteria they are eligible for ill health retirement

The amount payable for an ill health retirement is based on when it is likely that the member will be able to undertake gainful employment again.

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Ill health retirement - tiers

Tier 1

Employer determines that the member is unlikely to be capable of gainful employment before SPA

✓ Unreduced pension built up + unreduced rate of pension they would have built up between leaving and SPA, based on APP and main section of scheme

✓ Payable for life

✓ Non-reviewable

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Tier 2

Employer determines that the member is unlikely to be capable of gainful employment for at least 3 years from termination of employment but possibly before SPA

✓Unreduced benefits built up + 25% of the annual pension that would have been built up between leaving and SPA, based on APP and the main section of the scheme

✓Payable for life

✓Non-reviewable

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Tier 3

Employer determines that the member is likely to be capable of gainful employment within 3 years of leaving or, if earlier, before SPA

✓Unreduced benefits built up at date of leaving. No enhancements

✓Payable for a maximum of 3 years

✓Reviewable

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• Consider ill health retirement as part of the absence management policy

• Consider recommendation made by IRMP

• Consider any other evidence available

• Decision maker on whether the scheme member is granted ill health retirement, and under what tier

• Responsible for communicating the decision, with reason, to member. Employer should also include right of appeal in any correspondence.

• Notify LPP and member of the decision made

Employers role

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• Review the member in line with criteria laid out in the medical certificate / form

• Confirm if, in their opinion, the member satisfies the criteria for ill health retirement

• Confirm, in their opinion, how long it is likely to be before the member will be able to return to gainful employment.

• Advise whether or not the member has reduced their hours for the same reason they are being considered for ill health retirement

IRMP’s role

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If the IRMP confirms that the reduction in hours has occurred for the same reason as the ill health retirement:

• The pension accrued for the period they have been on reduced hours will remain based on the reduced hours

• The reduction in their pay will be ignored for the purposes of calculating APP, so the enhancement will be based on the level of pay before the reduction in hours changed

• This decision solely lies with the IRMP, the employer must follow the recommendation made

Reduction in hours

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• Calculate benefits based on instruction from the employer

- Copy of relevant form completed by employer / IRMP

- Leavers form confirming final pay and APP

• Pay member’s benefits inline with scheme regulations

• For Tier 3 ill health benefits, LPP will contact the employer to remind them to conduct the 18 month review

LPP’s role

IRMP

LGPS Employer

LPP

Active Member

Notify Scheme member

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The Process

Employer must arrange for the member to be

reviewed by an independent registered

medical practitioner

Employer reviews recommendation made by

IRMP as well as any other relevant evidence

and arrives at a decision.

If the ill health retirement has been granted,

LPP will calculate and pay the ill health

benefits to scheme member inline with

scheme regulations

Employer must notify the

member of their decision,

including rationale behind the

decision and provide the right of

appeal .

Ill health retirement is considered

as part of internal absence

management process.

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Tier 3 review

The former employer must undertake a review of Tier 3 pension when they have been in payment for 18 months

LPP will contact the relevant employer before a T3 review is due, the

employer must arrange for the member’s case to be reviewed by IRMP

Continue to be paid

For a max of 3 years

May be reviewed again at

the discretion of the

employer before 3 year point

Suspended

If the member is capable of

undertaking gainful employment

Deferred member until they

reach pensionable age (55

onwards).

Uplifted to T2

Benefits recalculated taking

into account T2

enhancement, using APP

Pension payable for life

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• Members can apply for early payment of their deferred benefits on the grounds of ill health at any age

• The criteria for early release of deferred benefits depends on the date that they left the scheme

• The date the benefits are payable is dependent on when the member left the scheme

• Benefits are paid unreduced, no tier system

• Deferred benefits payable on the grounds of ill health are non-reviewable

Ill health retirement - deferred members

Employer must arrange for the member to be

reviewed by an independent registered

medical practitioner

IRMP

Employer reviews recommendation made by

IRMP as well as any other relevant evidence

and arrives at a decision.

LGPS Employer

If the ill health retirement has been granted,

LPP will calculate and pay the ill health

benefits to scheme member inline with

scheme regulations

LPP

Member makes an application in

writing to receive early payment

of their benefits n the grounds of

ill health.

Deferred Member

Employer must notify the

member of their decision,

including rationale behind the

decision and provide the right of

appeal .

Notify Scheme Member

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The Process

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There is almost always going to be a cost associated with paying benefits on the grounds off ill health this is because they are being paid:

• Unreduced

• And / or enhanced

For most employers they are not invoiced directly for the pension strain amount, the costs are picked up in the valuation.

Cost of ill health benefits

32

Ill health retirements is the most common process that is appealed by scheme members

Stage 1 – Back to employer to review decision made

Stage 2 – To the administering authority to review the decision made

Pensions Ombudsman – Whole process may be considered both the employer’s decision and the decisions made at stage 1 and 2

Appeals

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Appeals

Has the process been followed correctly?

Have you asked

yourself the relevant

questions?

Are the decisions made

justified?

Have you directed yourself

correctly in law and adopted the

correct construction of the

regulations?

Have all relevant matters and

no irrelevant matters been

taken into consideration

You should not arrive at

a perverse decision

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The decision for any ill health retirement is the sole decision of the LGPS employer.

Employers Decision

Always provide LPP with the assumed pensionable pay for any ill health retirement for active members, this is because enhancements are based on APP

APP

Deferred Members

KEYTAKEAWAYS

The employer is responsible for communicating the outcome with the member, including the rationale behind the decision.

Communicate outcome

Must obtain a recommendation from an IRMP as a minimum, to arrive at your decision regarding ill health retirement. May also wish to seek a second opinion from separate IRMP

IRMP

Further guidance to support ill health retirement cases can be found on www.lgpsregs.org

LGA Guidance


You have a responsibility to make the

decision for requests of early release

of benefits on the grounds of ill health

even when the member is no longer

active in the scheme or active in their

employment with you

http://www.lgpsregs.org/

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Questions?

363

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LGPS Technical Update


N e i l L e w i n s

F e b r u a r y 2 0 2 0

37

Contents

• Fair-deal consultation

• Cost-cap process/McCloud

• 4-yearly valuations

• £95k Cap

• Questions

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Fair-deal consultation

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Background

• TUPE regulations give limited pension protection

• The Fair Deal policy and the Best Value Direction 2007 give additional protection

Ceding employer Pension protection

Employer subject to Fair Deal policy LGPS

Best Value authority LGPS/broadly comparable scheme

Everyone else

Auto-enrolment rules/Transfer of

Employment (Pension Protection)

Regulations 2005

• MHCLG has run 2 consultations (2016 & 2019)

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Proposals

• Some members will be given ‘protected status’

• Protected Status means that the person must have access to the LGPS

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Who will have protected status?

Employment compulsorily

transferred on or after

[TBC].

Fair-deal employer

Protected under Best

Value Direction or would

be and contract renewed

on or after [TBC]

Best value

The employer and the

Fair Deal employer

decide to give

protected status (either

party can decide to

revoke)

.

Discretion

42

Methods of giving access to LGPS

Method Part 1 sch. body Part 2 sch. body Others

Eligible by virtue of

employment with new

employer

Designated as being eligible

Admission agreement

Deemed employer route

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Guidance

• Academies will need to have regard to DofE guidance before allowing new employers to

use deemed employer route

• SAB will issue guidance to help Fair Deal employers

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Update

• Consultation closed on 4 April 2019

• Awaiting government response

• MHCLG confirmed in September 2019 that the response and regulations are delayed.

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Cost-cap process/McCloud

46

Cost-control mechanisms

• Under reforms, cost must be periodically assessed to ensure that the reforms are affordable

and sustainable

• In LGPS, 2 mechanisms – HM Treasury run the employer cost cap, and SAB run the future

service cost cap

• Movement of 2% or more in either direction will require changes to bring the cost back to

the target

• First test done as at 31 March 2016

• Prelim results suggest improvement to benefits needed, effective from 1 April 2019

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Proposals to improve benefits

Proposal Detail

Removal of tier 3Assumed that future tier-3 cases would be

awarded tier-2

Death-in-service grant Minimum £75,000

Improved early retirement factors If active on or after 1/04/2019

Contributions rates

Reduction in rates for those earning less than

£22,500

Also reduction for those earning between

£46,200 to £53,500

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McCloud case

• 2014/15 transitional protections

• Judges and firefighters argued it’s illegal discrimination

• They were successful at Court of Appeal

• Supreme Court refused government leave to appeal

• Government accepts that the judgment applies to all public sector schemes

• Tribunal hearing to decide remedy for fire/judges schemes

• Cost-control processes paused in the meantime

• Cost-control valuation will be re-run when the McCloud remedy is known.

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4-yearly valuations

50

Background

• Fund valuations carried out every 3 years – last one as at 31 March 2019

• The first cost-cap valuation as at 31 March 2016

• Originally, LGPS set to be every 3 years, all others every four years

• In 2018, rules changed requiring LGPS to run the cost-cap valuations every 4 years

• Consultation ran from 8 May 2019 to 31 July 2019 to move fund valuation to 4-yearly so to

align with cost-cap valuation

• 2 proposals to do so set out…

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Proposals

Option A Option B

1 April 20

1 April 23

1 April 25

1 April 29

52

Proposals

• Proposals allowing for interim valuations and review of employer rates outside of valuation

cycle

53

Update

• Awaiting government response to consultation (expected sometime this autumn)

• The next steps would be to consult on draft legislation

• Government confirmed that response is delayed. Likely to leave valuation cycle unchanged

to see if misaligned cost-cap valuation as at 31 March 2020 causes significant problems.

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£95k cap

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Background

May 15 –Conservative

manifesto pledge

July 15 -Consultation

Sep 15 – gov response/Ent Bill

Nov 15 –draft regs

May 16 –Enterprise Act

16

April 19 –consultation

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Proposals

• A cap (£95k) on exit payments

• Cap will apply to all public sector bodies (ONS definition) with a small number granted

exemption

• The cap will be rolled out in 2 phases (i.e. at a later point a second batch of employers will

be added to regulations)

• Cap to apply to most types of exit payment

• Provisions to relax the cap

• Guidance also released to help people understand the provisions

57

Update

• Consultation closed on 3 July 2019

• Treasury received approx. 600 responses

• Possible that pension strain will be exempt.

• If not, MHCLG working on standardised pension strain methodology.

• Consultation response expected in autumn 2019

• Understood that start will not be sooner than 1 April 2020

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Questions

Break


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The Importance of Data

Sharp Focus on Data Accuracy

• Accurate data is the cornerstone of efficient pension administration. LPP is 100% focused on ensuring that data systems and processes are working effectively across the whole administration environment.

• We have developed a comprehensive data cleansing package for our LGPS and other public sector clients, which ensures their data will satisfy all of the Pensions Regulator’s and Actuarial reporting requirements.

Key Events

It is essential that LPP hold accurate and up-to-date data, particularly in preparation for the following key events:

• Year End

• Annual Benefit Statements (ABS)

• Annual Allowance

• Triennial Valuation Exercises

• The Pensions Regulator (TPR) Data Scoring

Year End – Employer Legal Responsibilities

Regulation 80 of the LGPS (England and Wales) regulations 2013 states:

‘Within three months of the end of each scheme year, each scheme employer must give a statement to the appropriate administering authority giving the following details in respect of each employee who has been an active member during the scheme year’:

• Name, Gender, DOB, NI Number & Unique reference number for each employment

• Dates of active membership

• Pensionable Pay & contributions

• Employer contributions

• Any additional employee/employer contributions

Our Expectation – Employer Responsibilities

• Required to provide information requested

• Have awareness of terms of employer agreements

• Abide by contract terms / obligations under regulations

• Manage HR / Payroll systems

• Provide quality data (eg member joiner and leaver forms)

Annual Benefit Statements (ABS)

It is our regulatory obligation to produce Annual Benefit Statements to all Active & Deferred members by 31st August each year.

An accurate and up-to-date ABS is essential to:

• Enable members to effectively plan or make decisions about retirement.

• Provide members with information about their pension benefits based on the data the scheme currently holds.

Annual Allowance• The Annual Allowance is a limit set by HMRC for the amount

that can be contributed to a pension each year, while still receiving tax relief.

• If the limit is exceeded then members will be faced with an Annual Allowance charge.

• LPP have a legal obligation to send Pension Saving Statements to active members who exceed the annual allowance each year and advise them of the options available for paying the annual allowance charge.

• It is crucial that the member records are accurate and up-to-date. We cannot afford to get this wrong, particularly as it involves members having to pay additional tax charges.

Triennial Valuation Exercises• Although accurate member records are key to ensuring that member

benefits are paid correctly and on time, they are also vital for performing accurate valuations of the members’ liabilities which then leads to appropriate contribution rates being set for the employer.

• When valuation exercises are performed critical errors must be resolved within very tight timescales. Member data extracts are uploaded into an Actuarial valuation portal which checks the data and identifies any errors. This can be broken down by employer to highlight any that have vast amounts of errors.

• Sometimes errors can be resolved by LPP, however often we are dependent on employers providing additional information. This is why it is crucial that you ensure that the data we hold for your members is accurate and up-to-date. This is particularly important for New Starters, Leavers and any changes that may impact on members benefits.

Triennial Valuation Exercises (cont’d)Below is a snapshot example of the output from the Portal

TPR Data Scoring

In accordance with The Pension Regulator’s (TPR) requirements we must assess ‘Common’ & Conditional’ data on an annual basis for all our members.

As part of the TPR reporting process we must provide scores on the accuracy of certain member data broken down as follows:

• 11 Common data fields

• 22 Conditional data fields

• There were 49 Conditional data fields that could be possibly scored on and therefore to improve consistency LGA, along with TPR and the Actuaries produced a standard set of recommended core Conditional data sets to use. This resulted in 22 out of the 49 fields being recommended, however at this point in time we are only able to accurately report on 18 out of the 22 fields.

TPR Data Scoring – Common Data

Common Data Item Active Fails

Pensioner/

Deferred FailsDependant Fails

NI Number (Missing or TN) 7 98 81

Surname 0 0 0

Forenames/Initials 0 0 0

Sex 0 0 0

DOB 0 0 0

Date started pensionable service/policy/contributions 0 0 0

Expected retirement / maturity / target retirement date 0 0 0

Membership status 0 0 0

Last status event 0 0 0

Address 225 865 222

Post Code 229 941 237

Total Errors 461 1904 540

TPR Data Scoring – Conditional DataConditional Data Item

Fields Number of Errors

Divorce Records 0

Transfer In 12

AVC's 5

Deferred Benefits 231

Tranches (DB) 1283

Gross Pension (Pensioners) 12

Tranches (Pensioners) 1803

Gross Pension (Dependants) 0

Tranches (Dependants) 21

Date of Leaving 16

Date Joined Scheme 0

Employer Details 2

Salary 1324

Crystallisation 2768

Annual Allowance 361

Date Contracted Out 227

Pre-88 GMP 1342

Post-88 GMP 954

Total Errors 10361

Data Improvement Plan

LPP have Data Improvement Plans in place for all Clients to ensure that data quality issues are identified and resolved in a timely manner.

As part of the plan it is essential that we identify root causes and find a way to overcome these. We aim to do this by:

• Understanding underlying issues

• Providing ongoing employer engagement

• Improving employer knowledge by providing support through the various means we have available

• Continually reviewing and improving processes

• Ultimately our aim is to ensure that members get the right benefits at the right time. The implementation of a Data Improvement Plan, along with the provision of ongoing support for employers should aid us in delivering this service.

So Why is Data Important

Data

Year End

Valuation

ABS

TPR Reporting

Annual Allowance

Payroll

Leavers

New Starters

We are helping you to help us provide accurate and timely member benefits

Contact Details – Are they up to date?It is vital that employer contact details held on Your Fund are accurate and up to date. You can manage your contacts by clicking on ‘Your Contacts’ located on the top right of the page.

Questions

76

Engagement UpdateJonathan Howarth,

Engagement Officer, LPP

Engagement enables the development of constructive, productive

relationships over the long term.... Listening to employer concerns and

feedback is a valuable source of information that can be used to improve

project design and outcomes, and help a business to identify and control

external risks.

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Member Communications

P60 Done in-house

Pensioner

Annual Benefit

Statement & Active

Newsletter

Active

Annual Benefit

Statement & Deferred

Newsletter

Deferred

Employer Training

Employer Events

Employer Bulletins

Dedicated Website,

‘Engagement’

Mailbox & Employer

Helpline

79

Employer

EngagementEmployer Support

Scheme Presentations

ABS & Newsletter

Access to My

Pension Online

Website, Electronic

Contact Form

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Member Engagement

Contact Centre

81

Let’s stay engaged……please

keep your contacts up to date ☺

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image

888

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Questions?


898

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Close


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IMPORTANT INFORMATION

This presentation has been prepared to inform the intended recipient of information regarding LPP Ltd and/or its

subsidiary, Local Pensions Partnership Investments Ltd (LPPI) only. It does not provide advice on legal, taxation

or investment matters and should not be relied upon for any other purpose without seeking independent advice.

No investment decisions should be based upon its statements without such advice.

No other parties may rely or make decisions based on the content of this document whether they receive it with

or without consent. LPP and its employees acknowledge no liability to other parties for its content and no

representation or warranty is made, expressed or implied, as to the accuracy or completeness of the information

provided. This document may not necessarily contain the information that would be provided to another party

whose objectives or requirements may be different.

This information may contain ‘forward-looking statements’ with respect to certain plans and current goals and

expectations relating to LPP’s future financial condition, performance results, strategic initiatives and objectives.

By their nature, all forward-looking statements are inherently predictive and speculative and involve known and

unknown risk and uncertainty because they relate to future events and circumstances which are beyond LPP’s

control. Any projections or opinions expressed are current as of the date hereof only.

Where referenced, past performance is not an indication of future results. Investments can go up as well as down.

LPPI is authorised and regulated by the Financial Conduct Authority.

© 2019 Local Pensions Partnership

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L O C A L P E N S I O N S P A R T N E R S H I P ... · Our service consistently exceeds Service Level Agreements and we take a proactive approach to changing administration ... L