The full force of collaboration

03 February 2012

Partnership working in the police pensions sector is making a significant impact when it comes to efficiency savings, writes heywood Managing Consultant Jenny Gaughan

With so much talk of cutbacks and change in the police service, it would be nice to see some good news for a change. Even the police pension scheme has been in the spotlight, tarred with the same brush as other 'gold plated' public sector schemes as being too costly for the public purse.

Recent recommendations coming from Lord Hutton's review of public sector pensions introduce more challenges. Hutton recommends reducing costs generally by increasing employee contribution levels alongside the introduction of a Career Average Revalued Earnings (CARE) scheme to replace the current final salary scheme, for the accrual of future benefits. He also goes on to say, however, that the design of the uniformed services' schemes may need to be different to reflect their own particular service and career patterns.

As with other areas of the public sector, chief constables are required to achieve cost savings. Previous discussions have centred on centralisation or regionalisation to reduce costs through reducing the number of police authorities. To date, proposals have either been unpalatable or unworkable.

All is not lost, however. Where regionalisation has faltered in other areas, collaboration has grown strongly in the public sector pensions arena. Lord Hutton, in his 23rd recommendation, hailed the potential of collaborative projects in striving for efficiency savings, declaring: "Central and local government should closely monitor the benefits associated with the current cooperative projects within the LGPS (Local Government Pension Scheme), with a view to encouraging the extension of this approach, if appropriate, across all local authorities. Government should also examine closely the potential for the unfunded public service schemes to realise greater efficiencies in the administration of pensions by sharing contracts and combining support services, including considering outsourcing."

Administrators of police authority pension schemes can already draw upon tremendously successful partnership initiatives in public sector pension schemes, including the Police Pension Scheme, to help drive down their administration costs and reduce the risks of future costs arising from scheme design changes. In the pensions software arena, for example, the vast majority of Police Pension Scheme administrators are part of the CLASS Group. All members of this group use a jointly developed pension software system to administer their Police Pension Scheme records and consequently benefit considerably from shared cost developments.

CLASS collaboration has ensured that its members have been sharing effort, resources and costs whenever legislative change occurs, as well as driving out operational inefficiencies through enhanced automation.

However, as the pressure for further cost savings bites, even those members benefiting from CLASS may look at sharing services further or even outsourcing. For example, in the outsourcing arena, procurement options have been eased by the negotiation of an administration services framework agreement. For authorities looking to outsource, this framework agreement avoids the need to negotiate commercial terms and streamlines the sometimes onerous and costly requirements of European Union procurement regulations.

As well as collectively helping Police Pension Scheme administrators reduce costs by providing them with enhanced automation, heywood is also supporting a number of other collaboration initiatives amongst CLASS Group members. Some have been in support of commercial Third Party Administrators (TPAs) who can operate under the framework agreement just described; others are police authorities who carry out pension administration for other police authorities and local councils who offer outsourced administration to other councils and police authorities.