I welcome everyone back. We have had a changeover of witnesses, and I am now very pleased to welcome to the committee the Auditor General, Stephen Boyle, to aid us in our consideration of the section 22 report that was recently published on the audit of the Scottish Public Pensions Agency for the financial year 2024-25. Alongside the Auditor General are Michael Oliphant, who is an audit director at Audit Scotland, and Stuart Nugent, who is a senior audit manager at Audit Scotland. Auditor General, I invite you to begin the evidence session with a short opening statement, after which we will put questions to you, Michael and Stuart.
Many thanks, convener, and good morning. As you mentioned, I am presenting a report on the 2024-25 audit of the Scottish Public Pensions Agency under section 22 of the Public Finance and Accountability (Scotland) Act 2000. My report brings to the committee’s attention issues relating to the SPPA’s performance in discharging its responsibilities in relation to the 2015 pensions remedy, as well as wider concerns about the agency’s governance and transparency.
Following what is known as the 2018 McCloud judgment on age discrimination in the UK’s 2015 pension reforms, the SPPA, as a public pensions administrator, has a legal responsibility for delivering pensions remedy calculations to members of the four public pension schemes that it administers, which are the schemes for the NHS in Scotland, police, the fire service and Scottish teachers. That work includes presenting all eligible scheme members with a choice about the different options for benefits that they will receive. There was a statutory deadline of 1 April 2025 for the SPPA, along with other UK pension authorities, to do that, but the SPPA did not meet the deadline.
In the auditor’s view, the SPPA underestimated the scale and complexity of the work that is involved in calculating the options across each of its four schemes. It is now working towards revised deadlines through to 31 July 2028—more than three years late—to fulfil its obligations. The legislation allows for some flexibility in timescales, but progress remains slow. As of November 2025, the SPPA had issued choices to 55 per cent of scheme members out of a total eligible population of just under 200,000. That includes active and deferred members, as well as those in retirement. Delays mean that some retired scheme members might not be receiving their full pension entitlement.
It is our view that, overall, the SPPA has not yet demonstrated sufficient transparency regarding its progress on remedy. As I mentioned, the auditor has also reported concerns about the governance of and transparency in the agency. During their annual audit, Michael and Stuart will continue to monitor developments and progress, especially progress with remedy. I will take a view on whether there should be further public reporting to the committee on receipt of their next annual audit report.
As you mentioned, convener, between the three of us, we will be happy to answer any questions that the committee has on the report.
Thank you for outlining a little bit of the history of the situation. At the start of your statement, you mentioned transparency, and it strikes me as being of interest that there is such a variation in the level of assessments made for the different occupational pension schemes in the public sector. For example, in your report, you highlight the fact that 85 per cent of retired police scheme members have received their assessment, but zero per cent of retired firefighters have received their assessment. Why is there such a big variation between two groups of workers in that way?
You are right, convener. I refer the committee to exhibit 1 in the section 22 report, which sets out the different categories of pension scheme members and progress towards remedy calculations across the different schemes.
11:15
I will bring in Michael Oliphant to set out some of the specific detail about why the police and fire service pensions are so different. Towards the end of last year, the SPPA’s accountable officer and chief executive gave evidence, along with his colleagues, to the Parliament’s Finance and Public Administration Committee and some of that is really relevant. There is now only one employer for the police in Scotland and the situation is the same for the fire service. That is an important point to come back to, but if we look at other schemes, such as the scheme for teachers, we see not only local authority employers but others, too, and there are more than 800 employers in the NHS scheme.
Although there is a difference of scale between the NHS and the police, that does not tell the whole story. Having 800 NHS employers was not a new development for the pension scheme, but it highlights some of the historical issues within the SPPA. This is not the first section 22 report that has been produced: it is the first in this session of Parliament, but my predecessor prepared section 22 reports on the progress of the implementation of information technology systems in the agency and some of that is still relevant today. In his evidence to the Finance and Public Administration Committee, the chief executive recognised that there has been underinvestment in both IT and effective data management arrangements within the agency. Those data management arrangements are fundamental to why the agency has not been able to make consistent progress.
To address your second point, transparency really matters, because people who are retired might not be receiving their full pension entitlement. The agency has been dealing with a great deal of complexity and is not the only pension provider in the UK that is struggling to meet the deadlines, but we think that there has been an optimism bias in its communication to members and that it should be far clearer about what members can expect to receive, and when.
My final point is that there is considerable work to do. As I said in my opening statement, 2028 is the revised deadline. There is scale and complexity in going through the individual calculations for all the remaining members and there is a need for the agency to take stock, as it is doing, of the technology and data management arrangements that it needs to put in place, alongside addressing remedy.
I will hand over to Michael to address the differentials in relation to the police and the fire service.
As the Auditor General said, the agency is dealing with one employer for police data and one employer for fire service data, but approximately 800 employers for NHS data. The agency can point to having better and cleaner data for the police, which means that less time is spent getting it into the right format for the system. All the police data is held within the pension administration system, which is not quite the case with other employers.
The difference between the police and fire service pension schemes is that some work was required on fire service data relating to pay differentials, acting-up allowances and so on before that data could be used.
In the year to October 2024, 87 per cent of all the freedom of information requests that the agency received in relation to remedy came from police scheme members, so the weight of voices in the police scheme may have been a factor.
That is interesting. I think we are going to get the accountable officer from the agency in to see us in a couple of weeks’ time and can put some of these things to him.
You said in your opening statement that the Scottish Public Pensions Agency has a legal responsibility, which begs a question. Are there any financial consequences for the agency if the remedy is not addressed properly and on time?
I will bring in colleagues on some of the specifics. However, if a member of the scheme has been underpaid, they will receive the differential plus interest. The interest rate is 8 per cent; it is set by the UK Government in recognition of the recourse that a member should have received.
Unlike the local government pension scheme, these pension schemes are not asset backed. They are, in jargon terms, pay-as-you-go pension schemes, the cost of which will be met annually through funding provided in the Scottish budget to meet the pension schemes’ obligations. Michael can supplement that answer.
The accrued interest rate that is applied is 8 per cent. That is funded by the UK Government. The recent estimate is that remedy payments for Scotland will cost the UK Government £1.7 billion; in the UK context, the cost is £19 billion. There are administration costs for the SPPA. It has estimated that administration for the remedy period—so over three or four years or so—will cost the agency about £20 million.
I wonder whether it is worth touching on some of the financial implications for the agency. Michael Oliphant is quite right in what he said, but maybe he can say a bit more about the additional resources that the agency has had to request from the Scottish Government to continue business-as-usual activity as well as make remedy calculations. The chief executive, Dr Stephen Pathirana, set out some of the detail on that to the Finance and Public Administration Committee.
As the chief executive noted, part of the issue is that it can take up to a year to train a member of staff so that they can go through the most complex calculations. As I mentioned a moment ago, individual calculations need to be made for each member. There has therefore been a significant injection of additional resource into the agency to allow it to work through those calculations.
Alongside that is what all of that that means for future provision and the work on digital and data management, which will be key to the quality of provision in future to those affected by remedy and the schemes’ other members.
The agency has a core establishment of about 300 staff, and it has had to recruit an additional 100 on temporary contracts to help with the remedy process and issue remedial service statements.
As the Auditor General said, it takes about a year to recruit staff and train them up. Usually, the new recruits deliver the business-as-usual stuff, which allows capacity to be freed up for staff who are more experienced and have greater technical knowledge to be involved in more complex remedy cases.
That makes sense.
I go back to my original question. All of this stems from the McCloud judgment, which was a court case in which the UK Government was challenged under age discrimination laws. My question was whether the Scottish Public Pensions Agency could be sued by people in the small claims court or another arena because it has failed to meet its legal responsibilities to make those assessments and then to give people any back pension pay that they are due.
I do not know whether the Scottish Government or the agency has adopted a definitive legal position on that. Our understanding is that the provision of accrued interest, which Michael Oliphant mentioned, is the position around remedy—that is on offer.
However, it might be that individual members or groups of members wish to take such a course of action. I am not fully sighted on that, so it might be for the agency to share with the committee whether it has any insight or experience in that regard. I will pause there, in case my colleagues have further information.
In relation to the timescales that were set, the agency will point to the section of the Public Services Pensions and Judicial Offices Act 2022 that is discussed in paragraph 10 of our report. The “relevant date” that it has to meet can be
“such later day as the scheme manager considers reasonable in all the circumstances in the case of a particular member or a particular class of member.”
So although the agency did not meet the original timescales, its view is that that provision in the legislation allows it to move the timescales. However, the act is silent on whether the agency can do that repeatedly, and we have queried that with the agency and the Pensions Regulator. We have not yet had a conclusive answer from the regulator, but we are not aware of anything that would suggest that it is not content with the action that the agency has taken. The agency was in discussions with the regulator before taking this action, but we have not had direct confirmation from the regulator as to its view.
Does it not then become a test of whether or not the agency’s action is “reasonable”?
I think that that is right. Michael has rightly mentioned the role of the Pensions Regulator. As a regulated entity, the SPPA is subject to engagement and communication with the regulator, so it will be instructive to hear whether its view on the reasonableness of the SPPA’s action leads to any individual issues or concerns, or potential legal action. It is clear that the SPPA’s regulatory engagement is not out of the ordinary among the steps that other pensions agencies across the UK are taking, but our view is that, given the complexity of the process, it would be better for the ability of the SPPA to carry out that process if there was more transparency.
Thank you. I am going to move us on and invite Colin Beattie to put some questions to you.
Auditor General, in your opening remarks you briefly touched on the impact on individuals. Although the bulk of your report is about process and so on, it is important to remember that there are people behind this who are suffering because of it.
I have had a few complaints, as you might expect, a couple of which I will highlight. One involves a constituent with cancer who is taking early retirement, for obvious reasons. They needed to adjust their mortgage deal, which could only happen once they received an updated pension projection. They were advised that it would take quite a few months to achieve that, and they were extremely concerned that they were at risk of losing their home. That is hardly a good position to be in when you are suffering from cancer. That case has been resolved.
Another one concerns someone who is retiring after 36 years of service. Since July 2025, they have been waiting for what they refer to as a quote from Capita. They have received no pension payments. They are suffering financial hardship, stress and anxiety. They, too, are fearful that their lack of financial resources might make them homeless because they will not be able to keep up the payments on their house. That case is still outstanding.
There are serious issues behind this matter that are affecting individuals. It is not just about people who already have pensions waiting to see whether they are going to get the option of an adjustment—people are being affected by this every day. I am concerned about whether there is anything in place for them, other than turning to an MSP or whatever, because a lot of people just will not do that.
The examples that you give are clearly very serious, Mr Beattie. May I ask, for clarification, whether those are cases that are being directly administered by the Scottish Public Pensions Agency?
The committee might be familiar with the UK civil service pension scheme, which is administered by the UK Government along with its provider. I asked because you mentioned Capita, which is the partner of the UK civil service pension scheme, and there are live and documented concerns about the issues with that pension scheme, to the extent that there was a joint statement from the UK Government and Capita in the past fortnight or so that acknowledged the scale of the issues and set out that the UK Government will provide hardship payments to scheme members who have not been receiving pensions.
11:30
I do not dispute the examples that you gave, particularly the first one, on the Scottish Public Pensions Agency, but I do not want to leave the committee with the impression that the SPPA is not making pension payments. It is making payments. However, the example in our report is that the right pension amount might not be being paid. Forgive me for asking for clarification.
Case 1 certainly involved the SPPA, because we got a response from it and, as I said, that issue was resolved. The second case referred to the SPPA, but I do not have the full letter in front of me—just a few brief highlights. The constituent certainly believes that the SPPA is involved. That will come out in the response, which I have not received yet.
Thank you.
I might ask colleagues to come in. There are two parts to the issue of performance, opportunities and risks around the SPPA. One is about addressing remedy, and the other is the impact that that is having on business as usual, such as providing annual benefit statements. I turn to Michael Oliphant to give more detail on what that means for the organisation’s performance in the round. Many people who are approaching retirement—some of whom will be affected by the remedy while others will not—will need information for life events, whether that is remortgaging or the sort of unfortunate example that you gave in which people are ill. The SPPA is best placed to come back on the detail on that, but we can perhaps say a little more about how that is affecting business as usual, as we understand it.
With the SPPA, scheme members are continuing to receive payments, although they might not be on the most beneficial payments. The agency has estimated that 70 per cent of affected members are on the correct pension, although they might not know that until they get their calculations and make their choice. However, that means that 30 per cent are not on the correct pension. Obviously, as Mr Beattie highlights, that creates a lot of uncertainty for financial planning. There is potential stress associated with that, and there could be historical tax implications that need to be addressed. That is part of the reason why the issue is so complex.
On the impact on business as usual, the agency has poor performance on issuing annual benefits statements, which is part of the issue with the remedial service statements that need to be given out in relation to the remedy. The agency also has to correct historical errors that have been identified. The Government Actuary’s Department has looked at some of the remedy calculations to provide assurance, and it has revealed some historical errors, albeit minor ones. Nevertheless, the agency has a responsibility to correct them.
On the agency overall, we mentioned some of the data problems, but it also relies heavily on manual processing. Its pensions administration system is now, I think, more than 20 years old. It relies heavily on manual processing, which can obviously introduce errors. Part of the agency’s longer-term ambition is to move to what it terms digitising the retirement journey, but it is unable to make sufficient progress on that while it has to deal with the remedy. It has to sort that out and correct the backlog before it can move forward to something that is more automated and digital.
The agency hopes to procure a new system by 2028, which will, we hope, reduce and potentially eliminate manual processing. I guess that, with that, the agency would be looking at reducing the staff numbers that it needs back down to the core levels that it would normally expect.
I will move on to the timescales involved. Paragraph 9 of the report states:
“The SPPA did not meet its 1 April 2025 legislative deadline for providing affected members … with Remedy calculations and options”.
Paragraph 10 states:
“Following guidance from TPR, the agency provided ‘breach of law’ reports for the affected cohorts in May and June 2025”.
Will you give us a bit of background as to what a breach of law report is and explain what sort of consequences, if any, it has?
I ask Michael Oliphant to take that one.
A breach of law report is a standard report that the Pensions Regulator requests of scheme administrators if they are in breach of any part of legislation that regulates pensions. The agency issued those reports on 22 May and 22 June in order to move the timescales for the police, NHS and teachers schemes out to 31 August 2025.
As part of issuing a breach of law report, the agency is supposed to outline a realistic timescale. The Pensions Regulator expects there to be a clear and realistic plan to ensure that, in this case, accurate remedial service statements are issued as soon as possible. It also expects engagement with the pension board and it expects affected members to be informed of the new date. If the Pensions Regulator’s expectations are not met, it might investigate further or consider using its statutory powers, which would be a form of special measures. However, it has not done so in this case.
At this point, there have been no consequences for the SPPA, other than the formal issuing of the breach of law reports.
No penalties have been applied, and the Pensions Regulator has not implemented any action that we are aware of.
The report states:
“In correspondence with TPR, the SPPA acknowledged that the previous extended dates were ‘ambitious’.”
Did the SPPA explain why those ambitious dates had been set?
That speaks to one of the overall conclusions of the report, which is that the original expectation of delivery by 2025 was overly ambitious. With the appointment of a new chief executive, we have seen a better understanding of the scale and complexity of the issues that the agency faces in relation to delivering remedy statements.
That also speaks to some of the evidence that was given to the Finance and Public Administration Committee in December last year, which better set out why the process has been so much harder and more difficult than the agency expected. The agency has had to go through line-by-line calculations for individual cases. Exhibit 1 sets out some of the progress that has been made, especially for former police officers who are members of the police pension scheme.
That realistic projection needs to continue, especially now that the agency has gone through some of the—arguably—cleaner data in relation to police members who are now retired. The agency still has to go through data in relation to the NHS and teachers schemes, which will, inevitably, be complicated.
The timescales need to be transparent and avoid optimism bias, and there needs to be clear, transparent and consistent communication, whether in relation to meeting the deadlines at the end of 2027 or, as we mention in paragraph 13 of the report, potentially into 2028 for some of the NHS calculations. There is a lot of work still to do, and it matters that that is communicated clearly to individual members and to scheme members across the piece.
Have you had an opportunity to see the assumptions behind the original estimates about time? Did they seem reasonable?
We have not looked at that. As the Auditor General mentioned, when the new chief executive was appointed in June 2024, he made some changes to governance. However, by his own admission in his evidence to the Finance and Public Administration Committee in December, it was a while before he realised the scale and complexity of the challenges.
During that time, the agency employed contractors to oversee the project, but it also sought assurance from the Scottish Government in the form of the digital assurance office providing it with health checks. That office provided an amber assessment of the project in September 2023, and an amber assessment was also reported to the audit committee in January 2024. The assessment moved to amber-green in March 2024, when the office said that it had found an improving position with strong project leadership being in place.
Tied to that were the agency’s risk registers, which scored the remedy project at 100 out of a maximum of 250. Our review of the governance papers showed that it was not until the latter part of 2024 that the remedy risks really came to light in what was being provided to the governance groups. The risk register then put the score at 250, which is the highest that it can be. It was not until the turn of 2024 into 2025 that the risks to the original timescale became apparent.
It is fair to say that some of the legislation and the guidance to pension schemes to support the remedy calculations were not provided on time. The agency found data quality issues as it progressed, as well as issues with the complexity of the calculations that it was working towards. As it noted in its evidence to the FPAC, it embarked on the ill-health retirement assessments with the UK Government-set deadline of 2025, but they were delayed. The SPPA was not the only provider that was unable to meet that deadline.
The agency now has a much better understanding of the complexity of the issues, and it is working through them. What matters now is that the revised deadlines that are set are realistic, for all the reasons that you mentioned in your original question, Mr Beattie. Individual pensioners may or may not be receiving the right amounts through the systems. It is also important to be clear so that people’s expectations are managed effectively.
Paragraph 12 of your report states:
“the SPPA’s Chief Executive wrote to the Scottish Government with a progress update and a request for additional funds over the medium-term period to deliver Remedy.”
In the bullet points that follow, you deal with different scenarios and you note that, in the worst case, it could be 2030 before this is resolved. What amount of additional funds did the SPPA request from the Scottish Government in September 2025 and what amount did it get? What was approved? Was the full amount received?
Michael Oliphant can answer that.
In that request, the agency was looking for about £1.8 million, given the budget pressure. I believe that that was found through offsetting savings within the corporate portfolio.
So the SPPA received the full amount.
That is my understanding—it received what it had asked for.
You know that for sure.
Yes.
11:45
Your report says that the SPPA wrote to the Pensions Regulator in October 2025 to advise it of further delays and that, at the time of the audit, the regulator
“had not provided a view on the SPPA’s actions or deadline extensions.”
Do you know whether it has now provided a view? If not, is there an expected timescale?
We have not heard the Pensions Regulator’s view. We have asked for that. I ask Stuart Nugent to comment on the recent dialogue that we have had with it.
We wrote to the Pensions Regulator several months ago, and we have been in on-going dialogue about the legal background to our query, given that we are dealing with a Scottish situation and that the regulator exists outside Scotland. We are considering the latest communication that we have received from the regulator, but we have not yet had a view from it on the action that the SPPA has taken.
From what you have said, should I understand that the Pensions Regulator has a problem in dealing with you as a Scottish entity?
I would not say that. The Pensions Regulator is trying to clarify the basis of our information request, and we have not yet reached a point at which it is satisfied with what we have provided to it.
There are fairly well-established arrangements for external auditors of pension schemes or pension authorities to communicate with the Pensions Regulator, so I would not read in any concern on our part. I think that we are just waiting for clarification on our query.
I turn to Joe FitzPatrick to put some questions.
Some of my specific questions have been answered in responses to others, but I will follow on from Colin Beattie’s questions about the implications for individual members. Can you give us an idea of the scale of the impact that being on the wrong benefit could have on an individual, so that we can understand how that could impact on someone’s life—whether they are already retired and have been given the wrong pension, or are looking to retire but have been given the wrong estimates?
I do not think that we have that information at specific case level, so we would not know to what extent people are not getting what they are entitled to—or, indeed, in a small number of cases, whether they might have to pay money back.
We are looking at the application of a discriminatory period between 2015 and 2022. That is a smaller element over the course of someone’s pension life, if you like, but, equally, it could be financially significant. We do not know the detail but, as I have said, there is stress for individuals in not knowing whether they are on the correct benefit, irrespective of whether they are entitled to additional funds.
Do the individuals know that they are potentially impacted? Do they know that there is a question mark over whether they are getting the right amount?
Yes, they should know. Back in the latter part of 2023, the agency wrote to all affected members to say that their calculations would be reviewed as part of the process.
Are you confident that that part of the transparency of the process has been successful?
Of course it matters that people are informed, but I guess that people then want to know what that means for them personally and whether they are being underpaid. People may then think, having worked however many years in public service, that they are not getting paid what they are entitled to and should be receiving the pension that they are due—or, perhaps more distressingly, as Michael Oliphant mentioned, that they may have been overpaid a pension and are sat with a liability.
In the report, we try to convey the point that this is a complex process, and the SPPA is not alone in working through it, but it must be clearer in order to manage people’s expectations. As I mentioned to the convener earlier, there is good progress on police pensions, but considerable work remains on the firefighters, teachers and NHS schemes.
You said that, if someone was underpaid, they would be compensated by 8 per cent, which seems fair. However, I am slightly concerned about the opposite situation. If someone has been overpaid, will they have to pay that back? If so, would they have to pay it back with interest? What would happen for someone in that situation?
Whether interest had to be applied would depend on the individual circumstances and the time period involved. I am not entirely sure. There is a small number of cases in which an individual has been overpaid. I do not know whether Stuart Nugent has anything to add.
That was discussed at the Finance and Public Administration Committee. It was to do with a tapered relief, and the SPPA thought that a very small number of people might have been overpaid—I think that the number quoted was 30. We do not have full sight on that, and that is as much as we know.
Would those people be expected to pay that back?
I do not know.
My understanding is that they would be expected to pay it back, but I do not know the terms on which they would have to pay it back. It might be over an extended period, as opposed to in a lump sum.
The UK Government has set the 8 per cent rate for someone who has been underpaid. Has it also set a percentage for someone who has been overpaid?
I am not too sure whether that would apply in such a situation. We can check and come back to the committee.
That would be helpful. Thank you.
I turn to Graham Simpson to put some questions.
As with Joe FitzPatrick, a lot of what I was going to ask has been covered, but I will pick up on the point about people being overpaid, because it is a serious point. Even though it might affect only a small number of people, they might have been overpaid significant amounts. Throughout this period, a number of people will have passed away who were not getting enough or who were getting too much. What is happening in those cases?
In those cases, it is the beneficiaries of their payment who will make a choice based on the remedial service statement that they get. In the case of a deceased member, it passes on to the beneficiary.
Do we know whether that has been going on? Just imagine that you are a widow or a widower and, unbeknown to you, your partner has not been getting enough pension or has been getting too much. Suddenly, you get either a letter saying, “We owe you this” or one that says, “You owe us that.” Has that been happening?
Yes. It is one of the priority categories that the agency has been given. Ill-health assessment is one priority category, and beneficiaries of deceased members are another. There are various complexities with the calculations that have to be made.
Do you have any idea of the numbers that are involved?
No.
We can certainly check our records, but I think that the scale of the numbers might have been something that the chief executive of the SPPA covered in his evidence to the Finance and Public Administration Committee.
This illustrates the importance of safe progress. As Graham Simpson points out, especially given the nature of the schemes that the SPPA administers, it will want to be satisfied that it can progress as quickly as possible and reassure retired scheme members and families that they are providing members or their beneficiaries with the correct level of pension.
I think that it was Michael Oliphant who mentioned the reliance on manual processes, which seems a bit bizarre in this day and age. In the pension sector, it used to be normal practice for someone to sit down and work things out manually but I would not imagine that that is the case nowadays—although it appears to be the case with the SPPA. Why has it got to the stage of people having to sit down with a pen and paper and a calculator to work things out, rather than hitting a button to get a figure?
Historically, there has been underinvestment in the Scottish Public Pensions Agency’s IT systems. My predecessor produced a section 22 report and a section 23 report in 2017 or so that set out the circumstances surrounding what was, ultimately, the unsuccessful implementation of an IT system for pensions administration. Some of the legacy of that is still felt today within the SPPA. It does not have an effective IT system that allows it to do what you would expect. It is not unreasonable for you to expect that there would be some system automation in order not just to produce remedy statements, but to handle some of the day-to-day business as usual. As Michael Oliphant mentioned, there has been significant investment in additional staffing resources within the agency so that it can free up some of the longer-standing members of staff to do some of the manual interventions and calculations that are necessary for individual records.
The agency recognises that it needs to do more to invest in IT and data management. Both those processes need to be improved so that the agency can function as the committee would expect, with a level of automation in the regular, timely provision of annual benefit statements and in other service standards being met for deferred members and active members of the pension schemes, which will require investment. You are right that there is a reliance on manual interventions in the system by expert pension administrators. As we have already touched on, there are long lead-in times to train people to equip them with the level of expertise to do those things. There is no easy fix, but it requires considerable focus on IT to transform the service into what you would expect of a modern pension administration provider.
That is really concerning. Do you know whether SPPA has ever looked at bringing in some help from the private sector to get it through this period?
The SPPA uses private sector systems and has an arrangement with Altair, which provides pension administration systems. The previous statutory reports that I referred to were about planned engagement with private sector providers. The SPPA has relevant expertise on its audit and risk committee and its management advisory boards. It is not that there is a lack of diagnosis of where it might improve its arrangements, but the organisation’s current focus is on addressing the challenges that are presenting in resolving remedy. In due course, the focus will have to be on equipping the SPPA for what it needs to be in the future, while addressing its current issues. I will pause and turn to colleagues, who may want to say more.
It is worth saying that, as the SPPA works through the complexities with remedy calculations, there are a number of different categories that an individual case could fall into. Those categories could relate to marital status, pension-sharing arrangements following divorce, job changes, working pattern changes, ill-health assessments, and transfers into and out of the scheme over the period. The more categories a member is involved in, the more complex the calculation becomes, particularly if someone has already retired and retrospective adjustments need to be made.
The agency gave priority to the police scheme, which involved developing 27 different software calculators that can be used to quicken the pace when it comes to the other schemes. It can use those software calculators not only for remedy but for its business-as-usual activities. It means that its investment in developing the calculators is not immediately lost when working on business-as-usual activities.
12:00
Okay. Committee members have probably not had the chance to read the letter that was written to the convener of the Finance and Public Administration committee and forwarded to this committee. Interestingly, the letter says that a meeting is scheduled today between
“the SPPA Chief Executive and Minister for Parliamentary Business … with an agenda focused on a ‘deep dive’ of McCloud Remedy delivery in the police pensions immediate choice cohort”—
whatever that is—
“member communications and engagement, and SPPA resources.”
I do not have a question for the Auditor General about that, but I wanted to highlight that there is a meeting today and that it would be good for us to hear about its outcome.
We will follow that up.
The deputy convener will now put some final questions to the witnesses and wrap up the session.
A lot of ground has been covered, so I will keep it brief. Auditor General, have you had a chance to review the letter from the SPPA to Kenneth Gibson, which Mr Simpson just referred to, and the letter from Ivan McKee, the minister, to Kenneth Gibson? I appreciate that both are dated as having been sent yesterday. Has Audit Scotland had a chance to briefly look at them before today’s session?
Yes, we have. The agency shared them with Michael Oliphant towards the end of yesterday. I am familiar with the letters, which I have in front of me.
Okay. What do you make of them?
You will see from our report that one of the things that we comment on is the need for more transparency, which is important. The letters go some way to clarifying the scale of the issues that are in front of the agency and the need for it to communicate better. Other aspects are helpful because, as Mr Simpson indicated with his last point, there is a great deal of technical language. The SPPA’s letter sets out what “immediate choice cohort” and “active cohort” mean, which comes off the back of the Finance and Public Administration Committee’s questioning of the agency about those aspects.
However, the letters do not persuade me to deviate from my overall conclusions about the need for progress and for better transparency around that progress; the need for the agency to address the wider issues that are in front of it, which we set out in the report, around digital and data capabilities; and the need to transform its services for its scheme members in the future.
I am playing devil’s advocate, because I do not have a view on the SPPA’s efficacy or otherwise, but the body has a lot of money and people. It has hired 100 additional staff, which begs the question of how many staff it had in the first place. Yesterday’s letter said that that is an increase of 30 per cent, so let us assume that it had 300 to 350 staff as a baseline. The addition of 100 staff means that it has around 400 to 450 staff, which is a massive jump for an agency in a single year.
Looking at SPPA’s budget, I see that it has been given around £123 million, presumably of public money, by the Scottish Government over four years—that includes the coming financial year—just to administer the pension scheme before a single penny of pension is paid. Is that unusual? Is it proportionate?
You are right about the numbers. There has been a significant increase in head count in order to deal with the issues that are set out in the report, which require significant manual intervention. It takes a long time to train people—I think that the chief executive said that it takes about a year to equip somebody with the expertise to support the calculations as part of the process.
Michael Oliphant mentioned the number of additional software calculators that have had to be developed to help the agency arrive at some of its judgments. I am also sure that there is a caseload of correspondence from people who are keen to understand the situation with their statements.
I think that the numbers reflect the lack of historical investment in digital capability. The work of the agency is still predominantly a manual-based enterprise of administering and then working out calculations. That is a policy choice for ministers, as advised by the chief executive, and it may be the model that they wish to pursue.
You are right that the situation reflects the balance between people skills, expertise and digital capability.
The agency alludes to automation in its response, and it seems to have made quite a lot of progress in that regard. We can ask these questions when its representatives come before us, of course, but there is one phrase that the agency used that I quite liked: it stated that it wants
“to get it right first time”.
It will have to spend a bit of time on the calculators and on working out how to remedy. Once that is done, however, the automation of the process can allow the agency to rattle through the case backlog. I assume that that is what it is saying to us, reading between the lines. Is that not a good thing? Would you not want to spend a bit more time setting up those processes—presumably with some manual oversight and intervention—before then reaching the point at which you were comfortable that accurate figures were coming out the other end of the machine? I am sure that the last thing that the agency wants—given the context of Mr Beattie’s line of questioning—is to get through the process quickly and produce wrong information, so that people get statements that are over, under or wildly different. It is hard to criticise the agency for its approach.
That is very fair. The automation point is an interesting one. There is some inevitability to people’s expectations, including scheme members’ expectations. Broadly, people think that they will be able to log on to the website with the right user identification and password and get their statement, so that they can see what their benefits are. There should be calculators available for them, so that they can project and work things out for their individual circumstances.
In revisiting the evidence given by the agency’s chief executive and his colleagues to the Finance and Public Administration Committee, we noted that automation was being developed with the Scottish Government’s centre of excellence. In some cases, that was reducing tasks that had taken an hour to two hours down to five to 20 minutes. That is a good thing for organisational efficiency. However, although that would take the agency so far, it would not necessarily work for reviewing some highly complex cases.
On your overall point, deputy convener, I agree. I think that automation will be a feature of pensions administration, and it may increase organisational efficiency—but there need to be the right safeguards for complex cases, with some levels of appropriate human oversight.
Do you know whether the 100 additional staff are just temporary contractors who have been brought in to deal with the issue, or has the agency’s base level of full-time-equivalent staff rocketed?
I think Michael Oliphant mentioned that they were on temporary contracts, but you are right that that is an important aspect. There is a wider assessment of what the future holds for the agency in terms of workforce planning and the adoption of technology. Those will be key pillars of a baseline for the provision of service. In many ways, there will be complexity in doing that while the agency is dealing with remedy. As our report sets out, based on the agency’s forecasts, we could be into 2028 before the agency is clearing the backlog of remedy. At that point, how its workforce interacts with technology and what the scenarios and forecasts are will shape what the new baseline will be.
Like other members, I would be concerned that somebody at a later stage in life who has retired with health issues, for instance, might have to wait two years to get a back payment in their bank account when they could be benefiting from it now. I know that some cases are complex and lengthy, but do you think that the process should be sped up? Should there be a target for getting through the backlog more quickly, so that people—presumably pensioners, for the most part—will get their money?
That speaks to the heart of why I decided to do a section 22 report: I felt that there was a public interest, and individual pensioner interest, in supporting parliamentary scrutiny through this committee in order to support additional transparency and help the agency meet its new objective of setting realistic deadlines. It is not for me to suggest alternative deadlines, but deadlines should be set that are deemed to be realistic and that avoid being overly optimistic, as we describe early on in our report. Deadlines need to be realistic and appropriate, but also appropriately stretching. There are now 100 additional staff and the organisation is learning, as it works through complex cases, so it will be for the chief executive and his colleagues to take a view about whether 2028 is still the right deadline or whether there is a better date, and to communicate that appropriately to scheme members.
I have had a chance to read the other letter from the minister to the Finance and Public Administration Committee, which was, literally, thrust under our noses at the beginning of the meeting. It is quite short, and I was quite struck by the tone. It seems very different from and perhaps less contrite than the other letter. The first two pages are essentially a veritable “Why? This isn’t my fault. It’s not the Scottish Government’s fault. This is the UK Government’s fault.” I have no interest in the politics of all of this, but the minister makes some points that I thought you might reflect on, Auditor General.
On the first page, the minister says that the whole issue extends from the fact that the UK Government
“did not understand the complexity of the remedy”
and had set an unrealistic timeframe.
Three specific accusations are made. First, the UK Government should not have made the changes in the first place, because they were not compliant with the European convention on human rights. Secondly, not enough work was done to identify what timeframes would be needed for the remedy, so the deadlines were completely unrealistic. Thirdly, the UK Government was supposed to issue guidance to various public agencies, but the guidance arrived after the deadlines had passed. Those are quite profound criticisms of the UK Government by another Government. Do you have any thoughts or reflections on that?
I will cover those as appropriate. We touched on the third point in our report. Some of the guidance arrived after the deadline, so that was, inevitably, part of the narrative about why the deadline was not met.
There is a judicial judgment about the complexities involved. I will not take a position on that, other than to note that the McCloud/Sargeant case judgment identified that there had been age discrimination in the original intent to move scheme members from a final salary scheme to a career average scheme, but that the protections that were offered were deemed to be inconsistent with the law on age discrimination.
On that basis, we are content with what we set out in our report. There needs to be transparent communication and the remaining remedial service statement cases need to be addressed.
We know that the agency still has a lot of work to do, and in your earlier questions you touched on the additional investment of public money in the agency. The agency should do that remaining work as quickly as is realistic and, in due course, it should identify what that means for its future operating model.
I knew, before I asked the question, that I would not be able to drag you into that territory.
I note the letter, however. Both letters were issued on the same day but are markedly different in their description of how we got to where we are and whether things are looking better. I presume that more will come out in the wash when we speak to the agency.
I thank Michael Oliphant, Stuart Nugent and the Auditor General for their evidence this morning on this important report.
We will convene a special meeting of the committee on Tuesday 17 March, when we will take evidence from the chief executive of the Scottish Public Pensions Agency, as well as from the Scottish Government’s director general corporate, because there is some responsibility in that quarter, too. We look forward to that session, when we will be able to put some questions to them.
As I understand it, Auditor General, this is the final public session of the Public Audit Committee that you will attend. I say, on behalf of the committee, a great thanks to the staff at Audit Scotland, and especially to you, for your outstanding leadership of the organisation. The public service that you provide, the spotlight that you shine, in the public interest, and the quality and standard of the work that you produce are exceptional. It has allowed us, as a committee, to scrutinise public bodies in the way that we have been able to do over the past five years—at least, while I have been chairing the committee, because Colin Beattie goes back even further. The work that you do provides not just this committee and Parliament, but the public, with a hugely important public service. I wanted to put that on the record, on behalf of the committee.
12:15
Meeting continued in private until 12:47.