09 Jul 2020 - Firefighter's pension Risk Register - Local Firefighter Pension Board Meeting

Firefighter's Pension Risk Register - Report of the Scheme Manager

Agenda Item No: 6

Purpose of Report:

To update Board members on the current status of the Firefighter’s Pension Risk Register.


That Board members note the updated Risk Register attached at Appendix 1.

Contact Officer 

Name: Becky Smeathers , Scheme Manager
Tel: 0115 838 8100
Email: becky.smeathers@notts-fire.gov.uk

  1. Background

    1. The Pension Regulator recommends that the pension scheme manager must establish and operate adequate internal controls that enable them to manage the risks that relate to the scheme. The scheme should also have a process to identify, evaluate and manage risks on an ongoing basis.
    2. The Pension Risk Register is a key document to identify areas of risk, identifying appropriate actions to mitigate this risk and to manage the process. The document is a live document, continually being updated and reviewed.
  2. Report

    1. Developments since last meeting

      The current risk register is attached at Appendix 1. Changes since the October meeting and updates to the risks are highlighted in grey on the risk register.
    2. The risks which score Very High on the Risk Matrix in Appendix 1 are identified below:
      High Risk table
      Risk NumberRiskComments
      1Transfer to new administration providerA full OJEU tendering exercise has been successfully undertaken and West Yorkshire Pension Fund have been appointed. The new contract is due to start December 2020. Implementation is currently going to plan. This risk score should reduce as implementation takes place.
      2/13McCloud transitional protection remedyBoth the risk of disruption of service and additional costs remain a very high risk. This also impacts on several other risks, including the workload for the new administrators once the remedy is agreed upon.
      3Member data and records incomplete or inaccurate.This risk remains at an elevated level until all data is transferred to the new administration provider and assurance can be gained around the accuracy of data.
      4Administration process failure/ maladministrationAgain, this risk remains at an elevated level pending the transfer to new administrators. this will be reviewed once adequate arrangements are felt to be in place.
      14Four Yearly Pension Scheme Valuation – Risk of increased contributions and affordabilityThis follows the increase in employer contribution costs caused by the changes in the discount rates. The date of the next valuation is 31 March 2020. This could have a major impact on costs as it will need to reflect the McCloud judgement. For this reason, it may be some time before the results and likely impact are known.
      19Communications with Members may not meet statutory requirementsThis has been left in the “very high risk” category until the new administrators are in place as they undertake the majority of communications with members.
      20Failure to interpret rules or legislation correctlyThis continues to be a high risk area given the complexity of the Firefighters’ Pension Scheme rules and regulations.
    3. There was one other significant change to the risk register which was the addition of Future Court Cases (Risk 24) as agreed at the Pension Board meeting held on 9 July 2020.
  3. Financial Implications

    There are no financial implications arising directly from this report. Any financial implications for the Authority will be reported to the Finance and Resources Committee.
  4. Human Resources and Learning and Development Implications

    There are human resources implications arising directly from this report, in that pension matters affect most employees. HR department staff are fully involved in pension issues to ensure that human resources implications are taken into account.
  5. Equality Impact Assessment

    An equality impact assessment has not been carried out as this is not a new policy.
  6. Crime and Disorder Implications

    There are no crime and disorder implications arising from this report.
  7. Legal Implications

    The Public Service Pensions Act 2013 introduced a framework for the governance and administration of public service pension schemes. This report aims to fulfil the requirement for Pension Board members to assist the Scheme Manager in ensuring that effective administration arrangements are in place.
  8. Risk Management Implications

    There are a number of risks relating to the firefighter pension schemes, and these have been presented to the Board in the form of a risk register. The Scheme Manager is responsible for ensuring that the risks identified are appropriately managed. All of the issues outlined in this report are being, or have been dealt with by close co-operation between the pension administration team and Officers.
  9. Recommendations

    That Board members note the content of this report.
  10. Background papers for inspection (Other than published documents)


Becky Smeathers
Scheme Manager

Appendix 1

Pension Board Risk Register - Operational Risks
NumberRiskLevelImpactRisk ScoreExisting ControlsRevised LevelRevised ImpactRevised ScoreFurther Controls RequiredRisk Owner

Transfer to new administration provider.

Risk of reduced service during transfer period.

Risk of errors in transfer of information. Risk of project not being completed by 31 December 2020.


Planning already underway. Joint exercise being undertaken with Leicestershire and Derbyshire Fire Services.

Involvement of all key staff across 3 organisations and current suppliers.

Project manager appointed to project.

West Yorkshire Pension Fund (WYPF) have been awarded the contract.

Project Plan in place. Regular project meetings in place.


Ongoing monitoring of risks and progress against timelines.

Effective performance monitoring to form part of contract.

Specific arrangements to be agreed for those retiring close to cut over date.

Scheme Manager

McCloud Transitional Protection Arrangements discrimination case.

New administrators unable to cope with workload;

Internal staff unable to cope with workload

Lack of national advice / direction;

Unable to provide timely/ accurate advice to members;

Over complexity of new arrangements


Membership of Local Pension Board Effectiveness Committee – to gain knowledge and ability to influence national picture.

Attendance at relevant training events.

New administrators have understanding and awareness of situation.


Continued engagement at national level – both LGA and Fire Finance Network.

Ensure new administrators have adequate plans, including ability of software suppliers to adapt to new regulations.

Consideration being given to procuring additional resources to assist with pension scheme management across Nottinghamshire / Leicestershire and Derbyshire Fire Services.

Scheme Manager
3Member data and records incomplete or inaccurate.3412VH

Full review of records undertaken post transfer of pension administration from NCC to LCC.

Pension benefit statements issued on annual basis. Errors in records rectified and identified.

Reconciliation to HMRC records 2017.

Reconciliation between payroll and Administrator records.

Internal Pension Audits.


Introduction of monthly returns from NFRS (Iconnect) to reduce risk of data errors or missing data and reduce impact of year end work. This is being progressed.

Improved recording of data within ITrent.

Will need reviewing once new administrator in place.

Complete Data Audit with new admin supplier.

Implement Data Improvement Plan once data audit complete.

Data cleansing can be undertaken as part of transfer to new administration supplier.

Scheme Manager

Administration process failure/ maladministration.

Risk with new Administrators once new contract commences.


Regional quarterly client meetings to discuss current pension issues.

National advice and guidance from Pensions Adviser at the Local Government Association.

Review of pension administration by internal auditors in March 2018 provided substantial assurance.

Quarterly meeting with NFRS and Service pension administrators. Completion and feedback from TPR Scheme Return.

Pension Governance Audit judged as Substantial Assurance.

Formal agreement in place with administrator to include SLA and performance indicators against defined criteria.

3412VHWill require reviewing once new administrator in place.

LCC Pensions

Manager Scheme Manage

5Termination given by new administrators due to workload / risk etc2510HNew administrators fully aware of additional workload resulting from current legal challenges. Have knowledge and experience to assess risks.2510H

Build adequate securities into contract.

Keep under review following commencement of new contract.

Scheme Manager
6Pension software supplier disruption.2510HSoftware suppliers involved with McCloud discussions.2510HScheme Manager
7Incorrectly applied Tax Rules, including incorrect advice given to members.339H

Periodic national pension training organised by scheme advisory board.

Attendance at training / conference events.

Keeping up to date with information provided through circulars.

339HScheme Advisory Board looking at developing common list of benefits to be included in pensionable pay.Scheme Manager
8Impact of O’Brien case on Modified Scheme (judged that periods of service prior to the coming into effect of Part Time Workers Directive should be taken into account in calculating the amount of pension to be paid upon retirement)339HAwaiting guidance on any impact on the Modified 1992 Scheme.339HScheme Manager
9Common Data / Scheme Specific Data scorings for TPR survey – have dropped significantly236MQuality of data is being maintained. Discussions held with Scheme Advisory Board regarding data specification.236MOngoing discussions with TPR / SAB and system providers

Pensions Admin Manager

Scheme Manager

10New General Data Protection Regulation (GDPR)236M

Staff being provided with appropriate training

Covered within organisation’s wider GDPR controls.

Working with other Regional Fire Authorities to ensure compliance.

Privacy Notice in place

236MWill need to be reviewed once new administrator in place.Scheme Manager
11Risk of interruption of service due to COVID-19236M

One Pension Board meeting cancelled in March. Remainder of meetings moved to virtual platforms.

LGA training has been moved to virtual platform.

Administration contract been successfully tendered for – meetings being held virtually.

Internal functions and Pension Admin functions currently working well.

236MContinue to monitor situationScheme Manager
12Operational disaster fire/flood for example.155M

Business continuity procedures in place for NFRS Pensions Administrator (LCC).

Business continuity plans in place Finance and Payroll Team (NFRS). These were reviewed in March 2020.

Business Continuity Plans for the administrators are embedded in their corporate plans.

236MContinue to monitor situationScheme Manager
Pension Board Risk Register - Financial Risks
NumberRiskLevelImpactRisk ScoreExisting ControlsRevised LevelRevised ImpactRevised ScoreFurther Controls RequiredRisk Owner

McCloud: Costs may escalate to fund additional resources for implementation and system development;

Risk of fines / compensation if incorrect advice given due to complexity of the system.


Membership of Local Pension Board Effectiveness Committee – to gain knowledge and ability to influence national picture.

Attendance at relevant training events.


Consideration being given to procuring additional resources to assist with scheme management.

Exercise due to commence to identify those staff who may be affected and associated impact levels.

Scheme Manager
144 Yearly Pension Scheme Valuation – Risk of increased contributions and affordability.4416VH

LGA have sub group who work on behalf of authorities to challenge any assumptions made that will affect valuations.

LGA have appointed independent Actuaries to verify figures and challenge GAD if necessary.

Revised Firefighter Pension Employer rates announced 1 March 2019. Increases resulted in additional budget requirement of £2.6m, of which £2.3m is to be funded by grant.

Funding continuing in 2020/21.


Funding beyond 2020/21 still to be determined – will be included in spending review.

The date of the next valuation is 31 March 2020. This may again have a major impact due to McCloud. The results may not be known for some time

Scheme Manager
15Pension Fund Accounting mistakes3412VH

Checks undertaken by accountancy and HR of ill health and injury charges which has shown they are charged to the Authority, not the Pension fund.

GMP checks have highlighted prior year errors that have been corrected.

Internal audit reports provide substantial assurance.

248HKeep under review using national guidance, audits and reconciliations.Scheme Manager
16Excessive charges by NFRS Pension Administrators.248HNew administrators appointed. Savings in region of £15k per year achieved through change in system providers. Costs could still escalate given additional McCloud work, although West Yorkshire Pension Fund represent several Fire Services, and costs will be spread across them all.248H

Monitor costs related to McCloud.

Monitor risk of financial loss should maladministration occur.

Scheme Manager
17Collection of Incorrect Employer Contributions236M

Ensure correct procedures in place – especially surrounding tapering between schemes.

Received positive Internal Audit assessment.

236MInclude in future audits.Scheme Manager
18Fraudulent behaviour, including members forgetting to provide updated information144M

NFRS Internal financial processes.

Check incoming and outgoing scheme funds against schemes forecast – reconciliation process.

Internal audit have reviewed processes as part of their pensions audit which was judged to provide substantial assurance.


Conduct regular fraud monitoring process of incoming contributions payments against the schedule of contributions.

Consider periodic information check with retired members.

Scheme Manager
Pension Board Risk Register - Governance, Regulatory and Compliance
NumberRiskLevelImpactRisk ScoreExisting ControlsRevised LevelRevised ImpactRevised ScoreFurther Controls RequiredRisk Owner
19Communications with Members may not meet statutory requirements.4416VH

The Annual Benefits Statement is one form of communication, and this is already shown as a separate issue on the risk register.

Information is sent to those members who are breaching or close to breaching the Annual Tax Allowance.

Communications to starters, leavers and those whose circumstances change are generally good, with processes embedded.

3412VHProbably could have revised downwards due to continued high performance of existing administrators but left as will need reviewing after new administrators take overScheme Manager
20Failure to interpret rules or legislation correctly.4520VH

Regional quarterly client meetings to discuss current pension issues.

National technical advice and guidance from Pensions Adviser at the Local Government Association and CLG.

Attendance at national training events. Advice and guidance from pension regulator.

Policies and procedures in place.

Formal IDRP process in place for addressing individual pension disputes

LGA Bulletin to be reviewed by Pension Board.

3412VHWill need to be reviewed once new administrators in place.Scheme Manager
21Training and understanding of members of the pension board4416VH

National training provided by LGA

Regional training on key topics.

Training session undertaken as part 2 of each Pension Board

Training Register kept up to date


Provide training to address knowledge gaps identified: on-going.

Skills and knowledge audit of the Board and key staff

Scheme Manager
22Annual Benefits Statements to be issued by statutory deadline248VH

Regular liaison between pension administrator and software supplier

Data supplied by NFRS in accordance with template and subject to checking by pension administrator

ABS statutory deadline achieved for last 4 years


Moving towards implementation of IConnect and monthly inputting.

Will need to be monitored with new administrators.

Scheme Manager
23National GMP Reconciliation – risk that exercise will not be completed by December 2018 and errors remain in the system.4416VH

Progress on pensioner and deferred member cases has been good so far.

Regional quarterly client meetings to discuss current pension issues will highlight any concerns at an early stage

The Pensions Administrator has a dedicated resource working on this, and HMRC has outsourced some of the work to improve the timeliness of responses.

248HScheme Manager

Impact of Future Court Cases.

Risk of increased potential work load and costs.


Monitoring of national situation via LGA updates and training.

Liaison with Scheme Administrators.

248HConsideration being given to procuring additional resources to assist with scheme managementScheme Manager
25High turnover of Board members236MEnsure initial training available to new members to maintain knowledge of Board236MWill improve if Joint Board is set up successfullyScheme Manager
26Creation of Joint Pension Board – impact on scheme governance / reputational risk224LWorking closely with Derbyshire and Leicestershire Pension Boards to ensure governance of individual scheme is not weakened through creation of joint board224LThis is on hold pending appointment of new pension administrators.Pension Board
27System failures248HBack up and Business Continuity plans144MScheme Manager
28Cyber Risk248HFire Walls / ICT processes / accreditation144MInclude in data auditScheme Manager
29Restricting Exit Payments – the proposed new cap on exit payments to £95k will be insufficient to meet statutory pension payments.144MResponse to consultation exercise144MScheme Manager
30Classification of pensionable allowances248H

All allowances were reviewed against Blackburn principles when initially paid.

Attendance at LGA training seminar July 19.

Internal Review of pensionable allowances July 19.

144MScheme Manager
31Potential conflict of interest for members of Pension Board.248H

Pension board members to declare any conflicts and potential conflicts of interest on appointment to the Board and on an ongoing basis.

Pension Board conflict of interest register to be completed by Pension Board members.

Members of Pension Board to declare any potential conflict of interest at Pension Board meetings.

Conflict of interest policy has been adopted by the Board

Forms part of Pension Regulator training

Covered by Pension Governance Audit which provided substantial assurance.

133MReview and acceptance of reviewed Conflict of Interest Policy – October 2019 Board meeting.Scheme Manager

Risk Score Matrix
Likelihood 1 - NegligibleLikelihood 2 - MinorLikelihood 3 - ModerateLikelihood 4 - SignificantLikelihood 5 - Severe
Impact 5 - SevereMediumHighVery HighVery HighVery High
Impact 4 - SignificantMediumHighVery HighVery HighVery High
Impact 3 - ModerateMediumMediumHighHighHigh
Impact 2 - MinorLowLowMediumMediumMedium
Impact 1 - NegligibleLowLowLowLowLow
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