Getting to grips with Public Sector Pensions

What is happening with Public Sector Pensions in the next year? Shaun Tetley, chair of the Public Sector Specialist Interest Group at the Chartered Institute of Payroll Professionals, explains

There are a significant number of challenges that pension scheme custodians will face in the next year and this article focuses on the areas that affect service delivery to members. These are broadly similar across all schemes and include member engagement, the functionality of the self-service pension portal, data quality and governance/investment strategy. A number of these are driven by the pandemic and the need to respond to increasing demands from members. It seems that pensions have are suddenly got interesting!

Public Sector Pensions in the UK are big business with an estimated 5.8 million active members. The largest schemes in the UK are the Armed Forces, the Civil Service, NHS, Teachers, Police and Firefighters and the Local Government Pension Scheme. The table below gives the membership statistics. All schemes provide statutory defined pension benefits based on salary and length of service. The schemes were reformed under the Public Service Pensions Act 2013. The key features include: pension benefits based on Career Average Revalued Earnings (CARE); pension age linked to the State Pension age for the teachers, local government, NHS and the civil service; and pension age of 60 for members of the police, firefighters and armed forces.

Member engagement
With offices closed and a good proportion of scheme members working from home during the pandemic, this has led to a remarkable increase in the number of staff rethinking their retirement plans or seeking information on their pension benefits. Many are starting from a blank page in that: they have no idea how much they have built up in retirement benefits; they have never understood their annual pension benefit statement; they have forgotten their sign on credentials to the online pension portal or more likely have never registered for access in the first place; and they don’t know who to speak to for help.

Contact is finally made with the employer or custodians of the various schemes and this has exposed both strengths and weaknesses in the pension offering and should lead to a review over the coming months.

Scheme members want a range of pension service options including do it yourself self-service, simple pension scheme guides written in plain English, dedicated telephone helplines, email contact, web chat, drop in sessions, face to face and access to a frequently asked questions. They also want regular updates on pensions and the facility to book pension courses covering topics such as: guide to the pension scheme; increasing benefits; mid-life pension review; and pre-retirement.

These courses should include information on the state pension, the importance of making a nomination, guidance on the options to increase benefits such as AVCs and tips on the key activities a member should be carrying out each year to check their pension.

The self-service pension portal
The increase in member interest on pensions will require a review of the pension portal offering by scheme owners. The portal is the gateway to a member's pension information and its ease of use and functionality will influence whether a visit to the portal will become a regular occurrence. Reviews of the portal should be ongoing and remember that pension professionals don’t always know what is best; engage with your scheme members, reach out for ideas for improvement, listen and deliver.

As part of the recruitment process, engage with HR and make sure that a mandatory private email address is provided. This will enable direct email contact during the life cycle of the employment and beyond as a potential deferred member.

A common failure is the access registration process. Keep it simple and embed the normal website facilities such as automatic password reset. The screens must be simple to navigate, have a logical flow, be intuitive and be pleasing on the eye.  Review the menus and create a favourites list that includes the top enquiries/transactions that a member will use. Continual development of the portal is a prerequisite but don’t fall into the trap of the supermarkets when they move produce and consumers cannot find what they want.

Keep it simple and look at: what helpful functionality could you add to enhance the portal and encourage members to regularly use the portal; make sure you provide an easy to use 'what if' estimate facility to allow members to calculate their own retirement benefits at any given date; provide links within the portal to other material to help explain common areas of confusion. For example a link to explain the annual benefit statement; have you added a web chat facility or 'contact/ask us' facility?; have you embedded the key pension forms a pension scheme member needs to complete within the portal?; form a focus group to discuss how the portal could be improved.

Let us assume that you have ticked all of the boxes and your pension portal is a first class offering that you are proud to champion. The next step is to challenge what you are doing to drive up registration and then ensure that any visit to the portal is not a one off visit but a regular engagement.

The Holy Grail is to achieve 100 per cent registration but some schemes are only achieving around 25 per cent. The ability to contact members by personal email is the best way to drive up numbers. Instigate regular campaigns to capture new registrations with some hard hitting messages around 'you could be losing money if you do not check your pension record'. And provide a regular pension newsletter focused very much around the portal to encourage regular use.   

Data quality
Let us assume that you have the perfect portal, you have achieved 100 per cent registration and you are regularly engaging with your pension customers. Now for the potential elephant in the room, the quality of your data. The idiom rubbish in rubbish out could at a stroke devalue all your hard work and destroy the confidence of your members.

Data quality reviews need to be in your business plan as a regular and ongoing occurrence  and why not put the customer at heart and make it their responsibility to audit their own data once a year around the issue of the annual benefit statement. Get them to check their personal details are correct; their nomination is in place; their chronological service information is correct and up to date; their pay reflects the career average pay in the portal.

The Pension Regulator provides helpful information on data quality including advice on reviewing and improving your data (look up TPR data quality on google).

As we move towards the Pension Dashboard, data quality will be a key issue so we need to be mindful that anything we can do now to drive up quality will reap dividends when the dashboard goes live. The Pensions Administration Standards Association (PASA) has issued guidance on preparing for the dashboard in terms of data quality (see

Governance/investment strategy
The next year will be busy with ongoing reviews of governance and investment strategy. The following is an extract from the TPR guidance on governance:

Good governance is the bedrock of a well-run pension scheme. There is a clear link between good governance and good fund performance so it is an essential part of effective scheme management. Without good governance, you are unlikely to achieve good outcomes for members.

Good governance is about having motivated, knowledgeable and skilled people involved with running the scheme. It’s also about having the right structures and processes to enable effective, timely decisions and risk management, and to provide clear scheme objectives. It helps you to effectively oversee: administration and record-keeping; investment and funding (in local government schemes); and communications with members.

You should spend time and resources getting your scheme governance right. This will help you to minimise risk and maximise opportunities for your scheme and your members. Investing in good governance is likely to save you in the long run, delivering good value for members and employers, and improving member outcomes.

Members are taking an increasingly active interest in investment decisions. The climate change conference later this year in the UK will put further pressure on disinvestment from fossil fuels. Pension Funds should be consulting with its scheme members and employers on revisions to its Responsible Investment (RI) policy. Decisions to disinvest need to be balanced by the demand from members and the need to ensure that decisions are financially detrimental to the Fund.

And finally
It's going to be a very challenging year ahead. Pensions never stand still and it is encouraging to find that engagement with members is on a steep upward curve. You may even find that when those social parties commence again after lockdown and you say you work in pensions, you are suddenly the most interesting person at the party!   

Shaun Tetley is chair of the Public Sector Specialist Interest Group at the Chartered Institute of Payroll Professionals. He is also Head of Payroll and Pensions. forPortsmouth City Council & Gosport Borough Council.

Further Information:

Event Diary

digitech21 will seek to demystify the increasingly complex technology landscape and will showcase a host of public sector best practice case studies and the very best solution providers, each of whom are helping organisations to transform and improve the way in which the public sector delivers services to the citizen.

Supplier Profiles

Gardenia Technologies

Gardenia Technologies is a FinTech company established in 2016, provides advanced analytics and d

SJ Translation Services

Sometimes, writing is the only means of communication, especially during these turbulent times.