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PMI - Pension Protection Fund: Assess and Pay Project

04th March 2011
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08mins 31secs

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Presenter: Bringing us up to date now on its Assess and Pay Programme, here is the Pension Protection Fund's Head of Operations, Phillip Beecroft. Phil, can you just remind us exactly what the Assess and Pay Programme is and why it was set up?

Phillip: Certainly. The Assess and Pay Programme is a body of work, an initiative that we set up back in May 2009, to really look at how we can speed up the assessment of pension schemes which are eligible for PPF Protection. What we're really looking to do is set our aspiration out that we wanted to reduce the time it takes to assess those schemes from the average at that time of 35 months down to less than two years. What we really based that desire on is feedback from our stakeholders. The three main groups that we spoke to back in last year were the members themselves of those schemes which are in the assessment period.

At the moment there are about 400 cases and about 250,000 members in assessment, and what those people really indicated to the PPF that waiting three years to get certainty security about their pension was just far too long, so we wanted to reduce that. But also then speaking to our other stakeholders, the trustees themselves they felt that our current process was slightly bureaucratic and focused on ticking boxes rather than adding value, so we wanted to change that. And ultimately as well for our levy payers, the people that fund the Pension Protection Fund they wanted to see that process being as efficient as possible. So ultimately what the Assess and Pay Programme was really designed to do is get schemes through that assessment period as quickly and as efficiently as we can.

Presenter: How successful has the Assess and Pay Pilot been so far?

Phillip: Well, the pilot we feel has been extremely successful. It hasn't been without its difficulties, such as we are taking a group of schemes and trying very new ways of working with them and being quite creative in how we work with them, so that has raised some difficulties in itself, such as how we transfer data from the incumbent administrator to our own administrator, Capita, and we want to continue to work on those processes to make them as efficient as they can be. But essentially the pilot itself was a programme where we took 60 schemes out of the assessment period so we could test new ways of working on them. Of those 60 schemes that we took out of assessment last May, 57 of them have now had their Section 143 valuation approved by the PPF, 31 of them are actually transferred to the PPF, and we are projecting that the remainder of those schemes, the other 29, will transfer in March or maybe April time. So what that means is that for all the members of those schemes, there's about 15,000 of them, they've got that certainty and security that I spoke about earlier, nine months sooner, and we've also managed to transition over a billion pounds worth of assets into the PPF in a much shorter period of time than we expected.

Presenter: What lessons have you learned during the pilot stage?

Phillip: Well, there have been lots of lessons that we've learnt. I think there are a few key lessons that we've really picked up on. The first one is really that the assessment period itself is quite a complex process and it's quite unique - although it has elements of it which are well known to the pensions industry. There are parts of it which only exists when a scheme enters an assessment period and to be able to undertake those processes you really need firms which are expert in understanding what the PPF requirements are and how to go about bringing efficiency to that process. And one of the things that we really aspire to do now is to curtail the number of people that work on schemes in the assessment period. At the moment there are about 60 administration firms across the 400 schemes. That makes it very difficult for the PPF to communicate what its requirements are because we have to contact all 60 firms and specify what we want. If we could make the people looked at work in that area, a much smaller, a smaller group of people, it would be easy to communicate our requirements, and we could build that expertise and experience as we go along.

I think the second part as well that we've started to recognise is risk; that we need to analyse risk during the assessment period. As I mentioned before the trustees and their advisers commented that our current process, the one that we've used since 2005, would seem to be slightly bureaucratic and tick boxy and didn't actually respond to risk. One of the things that we were very keen to do is analyse risk and make risk based decisions as we go through an assessment period. So what might be appropriate for a very small scheme, with maybe 12 members, wouldn't be appropriate for a very large scheme with 12,000 members, and we need to draw a distinction between the two.

I think the final key learning that we've had is really on the adaptability. Both within the PPF and externally, people need to be able to adapt their processes and adapt their knowledge to be able to help each individual scheme. Each of the schemes is very different from the next scheme. So again to move away from that one size fits all process and to really look at the risk for each scheme and then use the knowledge from the trustees and their advisers to adapt our processes so that we only do what's necessary to remove the risk for that scheme.

Presenter: You recently set up the PPF Actuarial Valuation Services Panel, what exactly is that?

Phillip: Well, the PPF Actuarial Services Panel is linked through, what I was just talking about in terms of the expertise. What it is, it's going to be panel of firms, and there's going to be five firms on that panel, which produce the 143's evaluation, which is the valuation which determines whether a scheme should to transfer to the PPF or not. Well, most, the majority of schemes in the assessment period, there will still be an occasion where the scheme actuary produces the valuation, but most of the time we're going to be using this panel to do those valuations. The reason why we've set that up is during the pilot process where we took those 60 schemes out of the assessment period, what we have done is given those 60 schemes to our partner Punter Southall to do all the valuations, and the thing that we learnt there is really their element of expertise.

When there's a single firm or small group of firms working consistently on our requirements that they build up a body of knowledge about what the PPF expects of them and they're able to deliver a delivery economies of scale. So the period that we've found we're working towards in the past was first draft to final evaluation would take about 140 days, we've now got that down to less than two weeks, and also the amount of time that we spend internally reviewing those valuations has dropped significantly because we can rely on the expertise from that panel because they know what we require, we can audit their processes and we don't have to check every individual case. So really what we're looking at is having a small panel of people working on all the valuations going forward, which will bring efficiencies in both time and cost.

Presenter: Great, and so what are the next steps for the Assessment Pay Programme?

Phillip: The most immediate step is to finish off the 60 schemes that we took through the pilot process. Those are the ones which we are now committed to transferring. We've got 29 left to transfer, hopefully by 31st March, but part of that is the data transfer process. What we try to do there is really make the process for transferring the data from the incumbent administrator to our own administrator, Capita, much more efficient, and we're still having some difficulties within that process, so we need to continue to work with the industry and improve that side. The next step will then be to take the learnings that we've got from the pilot process and start to roll those out across all the schemes in the assessment period, so I refer to about 400 cases being in the assessment process.

We now need to adapt what we've learnt from the pilot to those schemes and get some of those schemes using these new ways of working so we can shorten their assessment periods. And the final part would be that we want to continue to work with the industry to develop our process as we go along. This is not a one-off programme which we want to complete and then forget about. What we really want to do is engender a culture both within the PPF and with the organisations that we work with within the pension industry of continuous improvement, so we get feedback from them and we react to that to keep improving the way in which we assess schemes.

Presenter: Phillip Beecroft, thank you very much.

Phillip: Thank you.

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