Once again, it was the London Borough of Barnet Superannuation fund (part of the Local Government Pension Scheme) under scrutiny. Back in 2017, the same fund was fined £1,000 for failing to provide a regular scheme return. The London Borough of Barnet Superannuation fund (“the Barnet fund”) came to the regulator’s attention again this year. In May 2019, the first warning notice was issued regarding internal compliance, and this was followed in July 2019 by an improvement notice. We understand from the regulator that there will be no more action taken against the Barnet fund. Its press release notes, "As a result of our work with the scheme manager the fund’s more than 27,000 members can be more confident that the scheme is being properly managed."
The Barnet fund might be “off the hook” for the moment, but the regulator’s investigative role is gathering momentum, and there are lessons to be learnt if you want to avoid its spotlight resting on your Local Government Pension Scheme fund.
Late payment of contributions
The Barnet fund was showing late payment of £1.7 million of contributions (it had 28,000 members). Late contributions are a breach of the law and, more importantly, mean that those contributions are neither available to pay pensions nor to invest. Potentially, late payment means that the fund misses out on investment growth. There is also the risk that if an employer is paying late, there might be something fundamentally wrong with the employer’s business model – they might never pay because they’re about to go insolvent – the longer this is allowed to slide, the larger the amount of contributions that might not be paid.
Solution
Effective and regular monitoring of employer returns is key so that these payments are made in a timely way.
Inaccurate data
The regulator found that the Barnet fund had a lot of inaccurate and unclean data about their pension administration. This resulted in inaccurate member benefit statements; 1880 wrong retirement statements were issued as a result.
Solution
Clean and accurate data is also critical to ensuring good administration. Records should be maintained efficiently and cleansed regularly. This is essential for good management of the pension fund but is also required under the GDPR. Keeping accurate, relevant personal data only for the appropriate length of time is an obligation under this legislation.
Over-reliance on third-party service providers
The Regulator recognises that delegation of some services is inevitable, and in some cases prudent. However, they are clear in their guidance that delegating any services does not absolve the fund of their responsibilities in respect of those services. The Barnet fund was noted as having administrative problems with some records remaining inaccurate. This can be a risk when delegating the purely administrative tasks that errors arise, and these errors are either not spotted, or the responsibility is transferred to the third parties.
Solution
While third parties may be relied on to carry out certain tasks, their performance and the outcomes must still be monitored. Clear agreements with the third-parties as to the level of performance accepted and regular meetings to monitor that performance are key. It is not sufficient to delegate responsibility on the assumption that you have delegated liability.
Historic failings
Realistically, given the weight and complexity of compliance, it is likely that most Local Government Pension Scheme funds will have at one time or another fallen in their procedures and practices.
Solution
The key to addressing these failings is to address issues as soon as they are identified and work hard to remedy them. They will be the responsibility of the fund, regardless of whether the function has been delegated (as above) and the implications for the fund for failure to manage can be serious. The Regulator can issue fines of up to £50,000.
If you have any queries arising from this article of any other pension matter please contact Doug Mullen.
The snappily named Assured Tenancies and Agricultural Occupancies (Forms) (moratorium Debt) (Consequential Amendment) (England) Regulations came into force on Monday 3 May 2021.
What is a post-nuptial agreement and why do people enter it? Find out more in this ebriefing.
This ebriefing considers the Government’s proposals to simplify the procurement procedures, as set out in Chapter 3 of the Green Paper entitled “Using the right procurement procedures”.
In the second of a two-part episode, trainee solicitors Tom Corrigan, Precious Melia and Sike Olawale discuss what a training contract looks like at Anthony Collins Solicitors.
Cases involving large-scale IT contracts are quite rare and the recent case provides a useful judgement for matters involving digital transformation projects which have gone wrong.
From 4 May 2021, The Debt Respite Scheme (Breathing Space) comes into force. This scheme provides debtors with the right to legal protection from their creditors.
Birmingham-based Anthony Collins Solicitors (ACS) has announced a raft of new promotions, including appointing three new partners.
EOTs have been aggressively marketed as a tax-free share sale, but that should not deter practitioners from raising EOTs.
Remuneration for the supply of goods and the power to award equitable allowances.
The government did not accept two of the Law Commission’s recommendations - as they saw them as important safeguards in protecting charities interests in property.
To receive invitations to our events, as well as information and articles on legal issues and sector developments that are of interest to you, please sign up to Newsroom.