Trustees looking to understand what can go wrong with data transfers should read the NAO's report on the civil service Michael Klimes finds
- NAO has produced a comprehensive report on administration of civil service pensions
- It is a case study in what can go wrong
- Trustees and administrators could learn a lot from it
Trustees and administrators do not have a lot of spare time these days. There is the next meeting to attend, the consultation to reply to and the next piece of legislation to implement.
Yet being able to pause and learn from mistakes is critical. The industry can learn a lot from the National Audit Office's (NAO) report into what went wrong with the administration of civil service pensions over the last couple of years.
It analyses how a series of system and communication errors led to delayed pension payments to civil servants after administration was moved from Capita to MyCSP.
A rocky changeover
The report cites four factors that, in combination, made the transfer of members to an in-house system run by MyCSP more challenging than it should have been. These are poor IT systems at MyCSP, miscommunication, poor member data and the Cabinet Office being under-resourced.
NAO head Amyas Morse said: "When MyCSP took over the administration of the civil service pensions payroll in September 2014, it did not cope with the workload and a large backlog of work built up.
"Some people were paid late and members struggled to contact MyCSP. Some reported hardship and distress. The problems were made worse by longstanding limitations in the membership data on which I have reported over the past five years."
As far as MyCSP goes, the NAO explains that an insufficient level of expertise in staff and substandard IT systems hampered its ability to take over from Capita.
Between September 2014 and March 2015, MyCSP failed to answer 99,408 calls as a backlog of work grew there. The NAO observes MyCSP did not have sufficient staff to process the 14,000 items of work inherited from Capita and up to 40,000 data issues requiring attention caused by migration of the system.
A backlog grew between September 2014 and January 2015, peaking at 22,000 urgent cases in January. The backlog of urgent cases was cleared in March 2015.
But by September 2015, MyCSP had returned performance levels to where they were before migration, according to the NAO.
MyCSP's monthly progress report showed call handling had improved to pre-migration levels at 96%. Complaints, while still high with 428 received during the month, were falling.
MyCSP responded to the report by saying a number of factors explain the challenges it faced. A spokesman said: "We recognise the findings of the National Audit Office report published today [11 February].
"In reference to the findings, it has been well documented that a number of factors led to the reduction in service levels, including a communication to 1.1m members which resulted in significantly increased call volumes and a corresponding impact on 'business as usual' workload.
"In response, MyCSP and the Cabinet Office agreed a number of actions to manage and improve service levels, such as recruiting new members of staff (including apprentices), increasing enquiry centre opening times and establishing an in-house training academy.
"MyCSP is pleased to confirm that, as detailed by the NAO report, performance is now back to a steady state. Call handling levels have been back to normal for the past six months, with a corresponding reduction in member complaints, significantly down from their peak at the time of the service challenges.
"Service to members remains our utmost priority and we will continue to work with the scheme manager (Cabinet Office) and employers to deliver towards that aim."
A Capita Employee Benefits spokesperson also responded to the report: "We welcome the publication of the NAO report, which provides much needed clarity about the transfer of service from Capita to MyCSP.
Capita actively engaged with, and supported, MyCSP throughout the migration project. The migration date was delayed at MyCSP's request.
"Since service commencement in October 2002, Capita had not incurred any financial penalties until August 2014.
"MyCSP postponed the migration of the service from July to September 2014 which resulted in additional workload to assist in the migration activity, and also presented a resource challenge as many employees had already made plans to leave Capita when they expected the service to migrate in July 2014."
While MyCSP is taking action to rectify the issues, better planning and project management would have made the transfer go more smoothly. It would have also reduced the discomfort members experienced over a several months.
The report also looks at the role of the Cabinet Office in this issue. A high turnover of staff between summer 2014 and January 2015 while the migration was taking place compounded the problem.
The NAO report said: "In its own Cabinet Office review of the migration, it concluded that it was under-resourced during the migration and failed to challenge MyCSP hard enough or soon enough.
"It agreed that MyCSP could change the basis of prioritising work. This allowed a second backlog to build up and generated further complaints."
Here, again having a lack of appropriate staff in the right place at the right time caused problems. There could also have been better co-operation between the Cabinet Office and MyCSP alongside more communication.
In response to the report, a Cabinet Office spokesperson said: "We are aware of the performance issues with the Civil Service pension programme from around a year ago.
"These originated from the payroll transfer from Capita to MyCSP in September 2014 and led to a significant dip in service and delays in processing pensions.
"Once the Cabinet Office were fully aware of the extent of the problem, we took definitive action and instructed MyCSP to take action and track its progress. This successfully cleared the backlog and brought performance back towards acceptable levels.
"We recognise that there are still some underlying data problems and we are developing a data improvement strategy as a matter of priority."
Despite the Cabinet Office's efforts to resolve matters in admin, problems remain with data. The NAO says data accuracy remains a considerable problem.
Changes to the lifetime allowance, annual allowance and pension tax relief will make it hard for civil servants to plan for retirement. Therefore, accurate data is needed more than ever to calculate what their pensions actually are.
Compounding this and making the calculations of pensions more complicated is the new civil service pension scheme called Alpha. It came into effect from 1 April 2015, as required by the Public Service Pensions Act 2013.
It was created as civil service pensions were made less generous and changed from a final salary arrangement to a career average earnings one. This reform was part of Lord Hutton's drive to make public sector pensions more sustainable.
Pension awards under the Alpha scheme require data for all years of service. This increases the need for accurate member records. Getting the data right is fundamental to running the scheme successfully.
A MyCSP spokesman said data accuracy will remain an issue: "We appreciate that in its report, the NAO recognises the constraints regarding underlying data problems.
"n fact, MyCSP has been highlighting, for some time, the issues and risks associated with membership data quality – in particular, the legacy data provided by employers. For example, MyCSP, the scheme administrator, produces annual benefit statements based on information provided by employers.
"It is the employer's responsibility to maintain accurate and complete payroll and service records, and supply them to MyCSP.
"Where the data received is of insufficient quality to pass the enhanced validation checks employed by MyCSP in the production of statements, this can lead to inability to produce information when required."
Lessons to learn
Better record keeping and investment in resources should have been there from the outset and might have eased the problems with poor data. The Pensions Regulator draws attention to the importance of record keeping in its response to the NAO report.
A spokesperson said: "The report highlights the importance of robust governance and administration of pension schemes in delivering good outcomes for members. In particular, good record-keeping is critical in ensuring that the right benefits are paid to the right members at the right time.
"Our recently published research shows that public service pension schemes have made good progress in putting in place processes to ensure they meet their new governance and administration duties but are slower to take action.
"We urge all schemes to measure themselves against the requirements of the record-keeping regulations and develop a plan of action to address issues without delay.
"Schemes should also ensure that rigorous controls are in place where schemes outsource services, and work with employers to ensure these provide timely and accurate data."
In time, the NAO report might come to seen as a case study in managing a change of administrator. All of the themes which emerge have been around the industry for a long time. They will remain so.
But the priority for trustees and administrators should be to read the report and absorb the lessons contained within it.
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