Are you bored with the old routine?  Looking for a job that will really stretch you?  Wanting to play a part in creating a brave new world?  If the answer’s “yes” then there’s only one career for you…local government pensions administration!        

Over the next twelve months, over 100 local authority funds, serving more than 1.6 million members of Local Government Pension Schemes (LGPS) in England and Wales, will be facing one of their greatest challenges: the implementation of the new local government pension scheme.  The lengthy consultation exercise to determine the type of scheme going forward has gone well.  That said, the DCLG’s almost immediate publication of draft benefit regulations has now presented local authorities with a fresh set of problems. 

Take, for example, the matter of ill health provision. The current wording is quite general and needs further refinement.  The new scheme appears to be more flexible, but this could prompt a greater number of people to seek early retirement.  This issue, like the recently published regulations covering scheme governance policies, requires further discussion.  Administrators should be allowed time to consult with their elected members before responding.  However, with the DCLG seemingly determined to publish the final regulations by April this year, this looks unlikely.  Consequently, local authorities could be going ‘live’ in April 2008 without having fully got to grips with the new regime.

The pressures on pensions offices – 2007 is also an actuarial valuation year – are huge.  Local government pensions have always been complex but the new scheme, which involves retention of the old scheme for past service, adds further administrative burdens.  Moreover it’s not a matter of imposing the new scheme on a uniform range of funds.  Local authority funds come in all shapes and sizes.  On the one hand, you’ve got the small London boroughs. On the other, there are massive funds like the Manchester Pension Plan.  Each fund is unique and subject to its own pressures.

Local authority employers are also very concerned about whether their payroll systems will be able to cope with the new scheme.  Each employer has a different system.  Aside from often having to serve part-time employees or staff with more than one job, there’s also the problem of dealing with the proposed two-tiered approach to contributions. This could result in employers and members being uncertain about how benefits are going to be calculated and, therefore, employers being unable to get the right systems in place to meet the April deadline.

But the key issue is whether administrators will have sufficient physical resources to handle this massive project while still maintaining day-to-day operations.  LGPS offices have always been cautious about the cost of administration and, in my view, benchmarking has often led to pensions sections being understaffed.  Given that offices are currently finding it difficult to attract good people to replace those who have retired, chances are they’re not going to find new staff with the right stuff to cope with the workload generated by the new scheme. 
Have local authorities been given an unrealistic deadline?  I think so. The Scottish Executive is considering deferring the scheme’s introduction until 2009 and the Government would be wise to heed the cries of alarm from England and Wales and follow suit.  Of course there would be costing implications but surely it’s best to spend time ironing out problems now rather than waiting for them to cause havoc later on.

But assuming the Government turns a deaf ear, what should local authorities be doing now?

Obviously it all comes down to planning – introducing new systems; working out how many extra staff will be needed; developing training programmes and methods for communicating with employers and members.  Administrators could also investigate opportunities for sharing development costs and resources with other local authorities and, if necessary, seek support from external consultants.

However you look at it, local authority pensions administrators should be strapping themselves in for a very bumpy ride.  Let’s hope they’ve been allowed enough time to ensure a smooth landing in April 08.