Auto-enrolment showcase: Making all the pieces of the puzzle fit

Key points

• Employers must consider the impact the cost of additional pension contributions and ongoing scheme administration will have on their organisation.

• Another key issue is how employers will handle the ongoing auto-enrolment and record-keeping requirements.

• Employers must ensure a full audit trail of employee communications is maintained.

Completing the groundwork for auto-enrolment is only the beginning, says Simon Fletcher. Employers must also make sure that their systems and technology can cope with ongoing requirements

In October 2012, the phased introduction of auto-enrolment and other associated employer duties resulting from the pension reforms will begin. This is not without its challenges for anyone involved in running, managing or administering workplace pension schemes.

Before doing anything else, an employer will need to analyse and segment its employee base into the three categories identified in the legislation.

Once this is complete, it will then be in a position to analyse the financial impact on its business, both in terms of additional pension contributions and the cost of ongoing administration and compliance. Employers will need to consider the most appropriate contribution structure in order to comply with the legislation and continue to meet their HR and business objectives.

Next comes the decision on the type of scheme to use – an existing arrangement, the national employment savings trust (Nest), or an entirely new scheme? Should employers use one scheme for all employees, or different arrangements for different sections of their workforce? This is an incredibly important decision and there is no one-size-fits-all answer. The Pensions Regulator stated in its corporate plan 2011-2014 that “all employers will need to review their current pension provision” in light of the new requirements, so employers should carefully consider all options before deciding on their route. We work with our clients to help them understand all of the above, finding the best solution for them in their own unique circumstances.

For employers that have already considered these vital first stages, the key issue is how they will handle the ongoing auto-enrolment and record-keeping requirements. Most existing HR, payroll, administrator or provider systems were not built to accommodate these requirements. That said, new software developed specifically for auto-enrolment is available and, as the first staging date draws closer, more and more solutions are being released to the market. At Johnson Fleming, we have spent four years developing our own online, real-time platform to provide employers with a simple, cost-effective, flexible and efficient solution for auto-enrolment and ongoing pension scheme administration.

Whatever solution employers choose, they will need to ensure it integrates seamlessly with their existing HR and payroll systems to ensure timely and accurate flows of data. The system will also need to manage and, crucially, record all employee communications. A full audit trail must be maintained in order to effectively track opt-outs and meet the automatic re-enrolment requirements.

The final piece of the puzzle is specialist support. This will be crucial, both for an organisation’s employees and for its HR or benefits team, no matter how good its chosen auto-enrolment system is.

Simon Fletcher is client relationship director at Johnson Fleming

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