By Richard Johnstone | 5 March 2013
The cost of local government pension administration could be cut in half through greater use of shared services and fund mergers, a government-backed pension firm has said.
Virginia Burke, business development director at MyCSP, which took over the administration of civil service pensions in May 2012, told Public Finance the firm was keen to expand into administration of council funds.
MyCSP administers pensions for civil servants across 205 Whitehall employers after the ‘spin out’ of the partly staff-owned firm. It took these over from individual employers and has demonstrated the possibility to make savings, Burke said, with plans on track to cut administration costs by half over its 10-year contract.
The current system in the Local Government Pension Scheme, where most funds undertake their own administration, ‘doesn’t really add up’, she said. There are 81 administrating authorities for the 89 funds in England and Wales at a cost of £119m.
Shared services or mergers should trim this to between five and ten ‘administration centres’ to get cost savings, she said.
‘Half a dozen feels about right,’ Burke said. ‘In terms of merging schemes, that’s a different issue but it would be possible to bring the administration together, even maintaining the separate schemes.
‘We would say you can halve the cost of local government pension administration. It’s currently sitting at about on average £28 per member, but its a huge scheme when you pull it altogether, so you should be able to at least halve the cost – some £60m in savings.’
Nigel Keogh, CIPFA’s technical manager for pensions, queried MyCSP’s claims. ‘If that level of saving were to be achievable, it would come at significant cost and risk to the LGPS and could only be achieved over a very long time period,’ he said.
‘There is greater scope for savings on the cost of fund management, which is where a lot of LGPS effort is currently being directed.'
