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Rule scrapping will lead to rising administration costs...
Rule scrapping will lead to rising administration costs

By Jennifer Sprinks

Pension fund administration costs are expected to soar when changes to the local government scheme take effect this October.

The government's final decision to remove the 85-year-rule - which allows workers to retire at 60 on an unreduced pension if their age and years of service total 85 - will require new documentation for scheme members as well as an overhaul of fund computer administration systems.

The scrapping of the rule will mean from October, if members want to retire early on an unreduced pension, they will have to pay in additional contributions.

West Midlands Pension Fund chief pensions officer Mike Woodhall said the move to scrap the rule last year, which the government networked shortly after, cost his fund nearly£60,000 in administration changes.

'It cost us to put in the changes to our system and then to put them back,' he said. 'We have been promised simplification [to the pension scheme] for many years, but with the announced changes the system will become far more complex, especially if we have to work out an individual contribution rate for everyone.'

Also, given the 'A-day' tax changes introduced to all pension schemes this month, which will mean members can ask for their pension to be paid as a tax-free lump sum, workloads are set to increase further.

Fund managers say they will have to calculate LGPS benefits manually because the new regulations came in too late for administrators to update their systems in time.

Mr Woodall added: 'We have not been well serviced at all. The delays have created a mountain for us to climb.'

Lewisham LBC head of pension administration Mike Dobson added: 'All of our computer systems are built around the current scheme, so will need to be updated to bring in changes for the tax-free lump sum option and the removal of the 85-year-rule.

'We will also have to change the documentation twice - which will be updated to reflect the A-day changes now and updated again in October regarding the scrapping of the rule.'

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