Sharing services and making it work for Scheme Managers
One of the themes at the excellent PLSA LGPS conference last week was a clear steer to increase the sharing of services in areas such as administration. Minister Teresa Clay was explicit about the Government’s views.
The rationale for doing this is clear: it is not just economies of scale but the ability to provide a better service by having teams specialising in particular functions. This is what the LPP pool has been doing by amalgamating offices in London, Preston and Hertford. Some LGPS scheme managers have for some time undertaken the administration work for other funds, effectively sharing services albeit by an outsourcing arrangement.
As with the Government’s pooling initiative, putting in place the right governance over shared services is important. The first point is that the pension fund needs to be treated as a separate entity: if services are shared at pension fund level (as with pooling) that will happen; but if services are shared at council level and the pension fund bundled in alongside, it may not.
The next question is who to share services with. Historic arrangements are in place but there is also some logic in eventually sharing services with other pool members, as is the case with LPP’s founding members. A further salient point in making this decision is which underlying software is used, as changing that is both complex and time-consuming.
Finally, consideration needs to be given to what sanction a scheme manager has if the shared service is failing to meet the agreed standards. As with pooling, in theory the authority can move administration to a different provider, but it becomes more difficult if either the council owns the shared service or if services are shared at council level. The alternative is to force change internally but that requires a body with the power to do that – and this is not always in place.
Linchpin has experience of what does and doesn't work in this area, and we are always happy to advise.