Spinning-out MyCSP as a mutual joint venture
The Government’s first mutual joint venture MyCSP, which administers pensions for 1.5 million civil service employees, has the potential to be good value for money with a projected saving of 25 per cent on costs after seven years, according to a report published today by the National Audit Office.
However, the complexity of the deal combined with poor quality of data, initial planning, and infrastructure meant that it took the Cabinet Office longer than intended to finalise the transaction. The Cabinet Office’s early planning of the deal suffered from poor governance; and the original transaction timetable and financial model were over optimistic. Furthermore, the Department and MyCSP still face many large challenges in transforming the service. The biggest challenge is improving data to support the implementation of the new 2015 pension scheme.
The deal is projected by the Department to reduce the cost of administration by 25 per cent, to £13 per member per year by 2019. Scheme members should receive a better quality of service as a result of significant investment in the business by the private sector partner, Equiniti Paymaster, and a payment mechanism that penalizes MyCSP if it misses the service standard levels in the contract.
The deal also means that MyCSP now has a credible plan to meet the challenges of the 2015 civil service pension reforms, including data improvement.
According to today’s report, the Department did not initially make the most of the opportunities to learn from this transaction as a pathfinder, but has now reviewed the lessons learned from executing the transaction and has put in place an evaluation strategy.
The report concludes that the Cabinet Office must ensure it evaluates the longer-term comparative performance of MyCSP and captures and disseminates the lessons learnt from the deal.
"We recognize there is significant potential value in the MyCSP deal for the Cabinet Office and for scheme members. But, given the challenges and the imminent pension changes in 2015, government will have to remain actively engaged as customer, shareholder and supplier to capture the full benefits of this deal and to ensure the risks do not revert back to government. The Department also needs to persist with its evaluation strategy to learn fully from this ‘pathfinder’ transaction and disseminate the lessons.”
Amyas Morse, head of the National Audit Office
Notes for Editors
- In April 2011, the Cabinet Office decided to transform MyCSP from a government activity into the government’s first mutual joint venture. It took this decision to ‘spin out’ MyCSP because it wanted the investment in infrastructure and expertise that a private sector partner could bring.
- The spinning-out of MyCSP involved selling 40 per cent of the organization to private pensions provider Equiniti Paymaster and giving 25 per cent of the new company to employees, with the shares being held in trust. The Cabinet Office retained the remaining 35 per cent. At the same time as creating the new company, the Cabinet Office agreed an initial seven-year contract with MYCSP to sell pension administration services back to the Cabinet Office.
- MyCSP paid out £4.9 billion to civil service pension scheme members between 2011 and 2012.
- Press notices and reports are available from the date of publication on the NAO website, which is at www.nao.org.uk. Hard copies can be obtained from The Stationery Office on 0845 702 3474.
The National Audit Office scrutinises public spending for Parliament and is independent of government. The Comptroller and Auditor General (C&AG), Amyas Morse, is an Officer of the House of Commons and leads the NAO, which employs some 860 staff. The C&AG certifies the accounts of all government departments and many other public sector bodies. He has statutory authority to examine and report to Parliament on whether departments and the bodies they fund have used their resources efficiently, effectively, and with economy. Our studies evaluate the value for money of public spending, nationally and locally. Our recommendations and reports on good practice help government improve public services, and our work led to audited savings of almost £1.2 billion in 2012.