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- Employers need an auto-enrolment roadmap outlining their objectives before reviewing providers’ services.
- Employers should compare their pensions, HR and payroll providers’ services with the market to ensure they are most suitable for their organisation.
- Test providers on how they will: identify staff to be auto-enrolled, communicate changes, and identify and manage staff whose earnings may fluctuate in and out of the auto-enrolment threshold.
- Service-level agreements can help ensure providers meet their promises.
Case study: Informa gets the auto-enrolment message straight
Media company Informa spent the start of this year creating a strategy outlining its auto-enrolment objectives to ensure it is fully prepared for the reforms.
Informa’s official staging date is June 2013, but it will comply with the legislation in January 2013, when the first salary sacrifice deductions are made for benefits selected through its flexible benefits scheme.
Informa conducted a review of the pensions provider market, including its own provider, Friends Life, in the last quarter of 2011. Thomas Humphris, head office HR and reward director, wanted to know what responsibilities providers would take for holding employee data and handling those opting out of its pension scheme. He also wanted to ascertain the level of support to expect in terms of communicating and educating staff about the reforms. “It is surprising how many providers create a lot of complexity around communication,” he says.
Informa decided to retain Friends Life on the strength of its communication services. It also felt the development of the provider’s management platform would fit into its schedule for auto-enrolment. As part of the deal, Informa also managed to negotiate lower annual management charges for staff.
Humphris has also reviewed Informa’s SAP HR platform to ensure it integrates correctly with Friends Life’s platform.
Employers must ensure their administrators meet all their needs when the pension reforms kick in, says Nicola Sullivan
The complexities of auto-enrolment and the forthcoming pension reforms call for compensation and benefits professionals to ensure their pension and payroll providers’ and administrators’ service levels are top notch. This requires a clear roadmap detailing what their organisation wants to achieve and any problems they want to resolve along the way.
Rudi Smith, a senior consultant at Towers Watson, says employers must establish how their providers and administrators will support them in several areas, including identifying employees that need to be autoenrolled, communicating workforce changes, and identifying and managing employees whose earnings may fluctuate in and out of the earnings threshold for auto-enrolment.
“Some employers may not look in enough detail at the processes required for their staff,” says Smith. “They need to do some work as part of the discussions with their provider.”
Employers should consider reviewing their providers ahead of their staging date for auto-enrolment to make sure they get the highest level of service for the best price. Informa, which will auto-enrol its staff in January 2013, six months ahead of its official staging date in June, has done just that. The media organisation compared its current pensions provider, Friends Life, with its competitors.
Thomas Humphris, head office HR and reward director at Informa, says: “If we are going to go down the auto-enrolment route and set up interfaces with our SAP HR system and our employee benefits platform, we are going to be with the pension provider for the long term. There is going to be a lot of development that needs to be done for that.”
HR and payroll systems
HR and payroll systems should be part of any review, to help employers understand exactly what information they already hold on staff before working out who they need to enrol and what contributions are required.
Martin Palmer, head of corporate benefits and marketing at Friends Life, says: “There is a natural opportunity for providers to take the information that employers get from the payroll and HR systems, interrogate that and work out which members the employer needs to automatically enrol. They need to make sure that process actually happens and that the employer meets those requirements.”
Management information can then be collected about which employees have opted out and will be due to be re-enrolled every three years after the organisation’s staging date.
But this may take some time to achieve, given that a number of pension providers have yet to develop or select their technology to manage the auto-enrolment process.
Humphris came across this issue during his review of pension providers last year. “We were surprised that a lot of the organisations were as not as far forward as we would have expected,” he says. “Some of them were still going through a selection process for their platform, some of them had not even started the selection process, and it was quite concerning. It got to the stage where some of them were trying to sell the emperor’s new clothes [and tell me] this is what it will look like, but there was nothing behind it.”
Clarifying the legislation
The government’s slowness in clarifying the legislation underpinning the reforms is being blamed for providers’ development delays. Bill Thompson, principal business consultant at NorthgateArinso, says: “We have been developing our functionality from early this year. We hadn’t been able to do much beyond the principal design before that because we have been waiting for The Pensions Regulator to issue all the documentation.”
Employers must ensure providers’ technology is fit to meet their auto-enrolment objectives. A service-level agreement can help to ensure this is the case, as long as employers carefully address response times, query resolution and system performance within the document, and set fixed penalties for any errors made by the provider.
Robin Hames, head of technical, marketing and research at Bluefin Corporate Consulting, says: “It is good to put in place an explicit agreement setting out clearly what the services are, what can be expected in which areas and what the provider can be hauled up on if [it doesn’t] deliver.”
Payment method should also be outlined in the agreement, saying whether the provider will be paid by a fee or commission. Hames adds: “If [the provider] earned it all upfront, where will the employer be in the pecking order when it comes to resolving issues?”
But first, employers need a clear idea of what they want to achieve, before and during compliance with the reforms, before inviting their providers to show how their services and software will make this happen.
Read also Pension reforms supplement 2011