Public sector pensions have undergone radical reforms, but there is still a way to go, writes Jerry Barnfield
Between now and April 2015, all public sector pension schemes are undergoing what are probably the biggest changes in our lifetime. With major amendments to benefit structures and contribution rates as well as implementing new cost control mechanisms, governance and regulatory changes, it really will be a whole new world.
We knew the timeline was always going to be challenging. The Public Service Pensions Act 2013 provided the framework for the scheme regulations and the future scheme design and governance which must be implemented by 1 April 2015.
The Local Government Pension Scheme (England & Wales) was in the vanguard implementing the changes in April 2014.
We knew the requirements were going to be complex. The government agreed that, within HM Treasury’s cost constraints, each public sector scheme could implement a scheme design appropriate to their members’ needs.
Certain scheme design features are ‘mandatory’ (such as benefits based on Career Average Revalued Earnings) but all the public sector schemes have introduced different features, accrual rates, revaluation mechanisms and transitional arrangements including differences for devolved parliaments and assemblies.
The calculations are particularly complex especially for members with transitional protection who get the better of old and new benefits
We knew that the biggest risk for our clients was not having systems and automated calculations in place on day one. The calculations are particularly complex especially for members with transitional protection who get the better of old and new benefits. As the leading supplier of administration systems to the vast majority of LGPS funds, we faced a real challenge.
Despite the delay in finalising the Transitional Regulations (just three weeks before April implementation) and receiving guidance from the Government Actuary’s Department, we provided all our LGPS clients in England and Wales with an administration system to support the benefit changes ahead of the April deadline recognising that an upgrade would be required when all the details were finalised.
The challenge is not over
We were pleased that this was acknowledged at the NAPF Local Authority conference in May.
But the challenge is not over. We are now working on the rest of the public sector schemes implementing in April 2015. The LGPS funds in Scotland and Northern Ireland, the locally administered Police and Fire schemes and the centrally administered Teachers and NHS schemes are all working on their draft regulations and some of them have drafts out for consultation.
We are working closely with all the relevant bodies (including DCLG, Home Office, Scottish Public Pension Authority, LGA and the CLASS Group) to ensure systems are in place in good time before the deadline.
Based on previous experience, we know that waiting until all the regulations are agreed for England, Scotland, Wales and Northern Ireland is too high a risk!
Jerry Barnfield is head of market and product strategy at aquilaheywood the leading supplier of life and pensions administration software solutions in the UK.