GMP- Phase 2 Reconciliation and Phase 3 Rectification

A Guaranteed Minimum Pension (GMP) applies to police officers if they have service in the Police Pension Scheme (PPS) between 6 April 1978 and 5 April 1997, and is used in determining the rate of their pension when they reach State Pension Age.

The purpose of the exercise is to ensure that records held by the PPS and by HMRC, in relation to periods of contracted-out employment are correct. This work is necessary to ensure that PPS scheme records are up to date and that data held by HMRC, which will be used in the calculation of an individual’s new ‘State Pension’ starting amount, are also correct.

All 43 Police forces are undertaking a GMP reconciliation so all police officers records (current and retired) are verified and if necessary, corrected. This exercise is industry wide and covers both public and private sector pension schemes.

The DMPC is asked to

• Approve overall spend of £1.7m (breakdown below) to enable the reconciliation of records held by the MPS and HMRC to ensure that scheme records and State Pension records are accurate. It is requested this spend across Phases 2 and 3 will be funded from reserves.

• Approve the award of work to Equiniti Paymaster (EP), via Shared Services Connected Limited (SSCL), who have already undertaken a significant amount of preliminary work in Phase 1a/1b on this GMP project, to complete the remaining work required to conclude the project under Phase 2 and note the requirements under Phase3, which will include the rectification of the incorrect records. The cost to complete the GMP data reconciliation in 2018/19 is estimated to be in the region of £1m.

• There is also a final Phase 3 ‘Rectification process’ part of the GMP reconciliation exercise. In this phase it will be necessary to correct the member’s record and advise them of any under/overpayments – we anticipate approval to write off any overpayments for police forces countrywide. The cost of stage 3 will be determined from the results of phase 2 – however we would expect to see at least an estimated further 500 days of effort – at a cost of at least a further circa £0.5m.

• Note that SSCL charge a fixed margin of 12% for Requests for Change involving 3rd parties. This could equate to a maximum margin cost of £204,545 should spend with Equiniti reach £1.5m.

1. Introduction and background

1.1. The MPS is legally required to carry out the GMP reconciliation. There is a time-limited window of opportunity to complete Phase 2. Query resolution by HMRC has been made available for a finite period of time to support pension scheme administrators to reconcile their records against those held by HMRC. The deadline for submitting membership queries to HMRC is 31 October 2018. HMRC will respond to all queries that they receive by that date.

1.2. EP have already successfully completed Phase 1a/1b of the GMP reconciliation project. This was paid for within the ‘call off’ days mechanism contained within the previous contract for outsourced pension administration with EP

1.3. Under the new (i.e. since May 2017) pensions administration contract with SSCL, who sub contract to EP, Phase 2 needs to be undertaken and will be charged for separately.

2. Issues for consideration

2.1. All employers have a duty to ensure our pension records are correct so that present and future liabilities are identified and cleansed at the earliest opportunity, irrespective of where that leaves us financially. This exercise will ensure that the Met is not exposed to future risk of unknown liabilities.

3. Financial Comments

3.1. The estimated overall costs are estimated to be up to £1.7m. The costs will be incurred during the 2018/19 financial year as one-off non-recurring costs. This will be funded from reserves.

4. Legal Comments

4.1. The MPS do not have a legal obligation to reconcile but are duty bound to reconcile GMP by virtue of specific aspects of a range of pension related laws, including Pensions Act 2004, Public Service Pensions (Record Keeping and Miscellaneous Amendments) Regulations 2014, Data Protection Act 1998 Schedule 1: The Data Protection Principles: Part 1 – The Principles and Pensions Act 2004 – section 90A.

4.2. This paper is being submitted to the Deputy Mayor for Policing and Crime (DMPC) for approval in accordance with the Scheme of Delegation and Consent which requires DMPC approval for expenditure of £500k and above.

5. Equality Comments

5.1. There are no negative equality or diversity implications arising from this procurement process.

6. Background/supporting papers

6.1. Report.