Background

The KPI indicators (14 annual) are being developed in order to provide funds with the ability to assess themselves against best practice benchmarks both across the scheme and across time. The indicators will also provide for a framework for the Board to provide support to funds in a targeted manner.

A pilot was run in March/April 2015 during which funds were given the opportunity to help develop the KPIs and in particular:

  • Assess their funds against the examples of best practice for high performing funds and examples of concern for each KPI
  • Inform how much effort/time/cost undertaking the pilot actually consumed compared to our estimate
  • Provide general feedback on the KPIs and examples of best practice and example of concern and any suggestions for their clarification, refinement, and improvement

 

The pilot also provided a test for the process of self-assessment in addition to the above feedback.

Summary of initial analysis of responses

  • A total of 45 funds completed the KPI proforma during October 2015.
  • The responses represented a cross section of funds in terms of size, type of administrating authority etc.
  • In addition to completing the proforma, administering authorities provided further feedback on the revisions made since the pilot, and general comments regarding the exercise.

 

Results output – (Annex1)

The results need to be viewed objectively and in aggregate before any rational conclusions are made. However, it is useful to chart the results so that the average/general scores can be seen.

Indicators showing recurrent non-compliance or where best practice is not widely followed may highlight areas to focus attention, while indicators that do not appear to differentiate sufficiently across funds may need to be revisited.

Time, effort and cost implications

The general feedback from the pilot was that the proforma took between two to three hours and up to a day of work to complete. This included factoring in time spent by colleagues, other departments and actuarial time.

There were no comments that the time required was unreasonable or over onerous.

Specific KPI feedback (not exhaustive)

  • Risk management; consider looking at internal/external audit reports.
  • Pension Committee/Local Board members; it is difficult to assess understanding and the effectiveness of training
  • Funding level and contributions; it needs to be clearer that this is on a standardised valuation basis, similarly for deficit and recovery period
  • Investment performance; some funds are not benchmarked, similarly for administration costs

 

General Comments

  • The negative score system could be seen as demotivating or off-putting. A positive scale, starting from zero could be more effective at building fund participation
  • Separate the triennial (actuarial) and annual (governance) indicators and more distinction between mandatory items and best practice
  • There could be more distinction between performance (objective) and governance (subjective) measures
  • Some KPI definitions need clarifying with support from ACA and CIPFA in particular on funding and costs
  • Quality indicator measures were duplicated and could easily be combined into one
  • Timing of release could be considered to avoid accounting period and ensure figures for input are ready

 

GAD Section 13

The Shadow Scheme Advisory Board was constituted in 2013.

In preparation for 2016 (first triennial valuation of the new, 2014, scheme), the Government Actuary’s Department (GAD), under Section 13 of the Public Service Pensions Act 2013, completed a dry-run report. The SAB working group collaborated with GAD during spring 2016, and agreed that rather than duplicating work, some indicators could be adopted for efficiency.

Consequently, since GAD will be conducting a section 13 valuation on all LGPS Fund, rather than on a sample or case-need basis, the KPIs requiring actuarial input have moved to a triennial basis and further separated from those on an annual basis, which relate more to accounting and governance.

In addition to local valuations and the scheme valuation for cost management, the SAB developed a standard funding basis for comparing the results of valuations for different funds.

The funding levels calculated on this basis is not intended to represent how well funded a particular fund is, but rather to assist in identifying approximate ranking relativities. GAD comments on its findings using this method based on 2013 valuation data used in the Section 13 Dry Run Report (section 4: consistency).

The results of these standardised basis calculations are being published anonymously on the Board website. These should provide an early indication of the overall funding of the scheme before the local results are finalised in early 2017 (in addition to allowing actuaries and administering authorities to see their fund’s position relative to other LGPS funds).

Next steps

The proposed workplan is as follows:

  • November 2016 – Complete redrafted proforma and guidance.
  • February 2017 – Provide revised proforma to all funds for completion (as of 31st March 2016, the latest valuation data available earlier than this being 31st March 2013).
  • April 2017 – Analyse responses and feedback.
  • June 2017 onward – Work with GAD, DCLG and others following Section 13 work and support and assist Funds accordingly (and intervening if necessary).

 

SAB Secretariat

Annex 1

Primary Indicators

1. Risk Management Indicator 1
2. Funding level and contributions Indicator 2
3. Deficit Recovery Indicator 3
4. Investment Returns Indicator 4

Secondary Indicators

5. Pensions Committee and Pensions Board members competence Indicator 5
6. Administering authority staff accountability, leadership, experience, and training Indicator 6
7. Statutory governance standards and principles (as per DCLG guidance and TPR codes) Indicator 7
8. Accessibility of information and statutory statements, strategies, policies (governance, FSS, SIP, comms, admin authority and employer discretions policies) Indicator 8
9. a) Adoption and report compliance with Investment Governance Principles (IGP) (was Myners Principles) and voluntary adoption/signatory to FRC Stewardship Code and UNPRI Indicator 9
10. a) Historic investment returns (last 1, 3, 5, and 10 years) and b) total investment costs compared with other LGPS funds. Indicator 10
11. Annual report and audited financial statements Indicator 11
12. Scheme membership data Indicator 12
13. Pension queries, pension payments, Annual Benefit Statements and Quality Assurance Indicator 13
14. Cost efficient administration and overall VFM fund management Indicator 14
15. Handling of formal complaints and IDRPs Indicator 15
16. Fraud prevention Indicator 16
17. Internal and external audit Indicator 17
18. Quality Assurance Indicator 18  

Annex 2

KPI Proforma