Twenty one months after the largest employers commenced automatically enrolling eligible jobholders into a qualifying pension scheme the pensions industry is preparing itself for the next big challenge. From the 1 April 2015 up to 31 March 2016 over 150,000 employers will reach their staging dates and they will all be required to meet their automatic enrolment obligations.
Having advised many employers who have commenced auto enrolment the key factors to make this process as smooth as possible and to take away the pain, are as follows:
- give yourself plenty of time to prepare for auto enrolment – a minimum of six months is recommended
- do not to assume that your existing pension scheme or your pension provider will meet your requirements for the purpose of the auto enrolment legislation
- understand that you do not have to enrol all employees, however, checking those who do not qualify may prove difficult
- decide early if you need assistance and seek professional help if you do, ensure that you meet all of your legal obligations
- ensure that your payroll system is compatible with the demands of automatic enrolment
- communicate the changes to your employees sooner than later
Where employers have followed these steps auto-enrolment has progressed smoothly and with the odd exception the administration processes are working well.
Will there be a “Capacity Crunch”?
With so many employers enrolling their employees over a short period of time there are fears that the pensions industry will not be able to cope with the demand for new schemes. So far most of the traditional pension providers have continued to write new business, though some are becoming increasingly selective and others are insisting on a minimum six month lead time due to their concerns that they will be unable to deal with the administrative workload. An employer’s existing pension provider may not satisfy its auto enrolment requirements they may need to look at one of the newer providers such as the People’s Pension, NOW or NEST.
We consider that there is still a risk of a scenario where NEST is the only remaining pension provider for employers with less than 10 employees, however, we are encouraged that the industry wide group Pensions BIB is looking at ways of addressing some of the capacity issues. Our understanding is that there is no shortage of capacity with regard to the provision of investment and record keeping services; however, there is an acute problem with regard to the transmission of data and a lack of standardisation within the pensions and payroll industries. If these issues can be overcome operating costs will be reduced and operating capacities increased.
We recommend that any data specialists in the pensions or payroll industry who are not aware of the work of Pensions BIB should consider the first draft of The Pensions and Payroll Data Interface Standard (“PAPDIS”) that Pensions BIB has recently prepared.