Professional Pensions Admin Panel August 2010
The Government recently confirmed its commitment to auto enrolment but initiated a review of certain aspects of the current regulations. Which of the areas under review would you change in order to make the implementation and ongoing administration of auto enrolment easier and what changes would you make?
Although certain aspects are under review, it needs to be recognised that this is very much ‘tweaking the edges’ and that the fundamental facets of auto enrolment, including its launch timeline, remain outwith the scope of the review.
Generally, employers are waiting to see what transpires over the next few months and, with their attention directed more to the ongoing economic situation, appear to be delaying or indeed, not yet even considering, their implementation plans. As much of the burden of operating auto enrolment will rest upon the employer’s HR and payroll functions, they need to be engaging with their administrators now, rather than at a point closer to its introduction, in order that the implementation process can be run as smoothly and efficiently as possible.
Currently the regulations only allow job holder information for auto enrolment to be posted or emailed. Do you believe this is the right approach going forward and, if so, why? Alternatively what other methods of communication do you think might be appropriate?
Whilst the regulations have gone some way to recognising that different organisations will wish to submit information in different formats and utilise different communication methods, both these methods of communication may raise questions over security of data transmission. Information submitted by post may go astray in transit and emails can easily be misdirected or held by spam filters without reaching their intended destination.
An alternative could be to allow the submission of data electronically through a secure website, similar to The Pensions Regulator’s Exchange site which would require an authorised user to log in and would provide comfort to the user that their data was being submitted securely.
Auto enrolment, particularly during the period of staging dates, will inevitably generate significant additional activity. What do you see as the key challenges for pension administration providers and do you think these will differ depending on whether administration is in house or outsourced?
The key issue for an administrator will be the degree to which the employer is educated and their buy-in to the auto enrolment process. Detailed planning will be required to ensure all the requirements are met across all clients. Interaction between all parties will be the key.
For the outsourced administrator, their challenges will depend very much on the staging dates for the employers they administer. As many organisations will focus on similarly sized clients, it is likely that a number of clients will reach their staging dates at the same time which will in turn potentially lead to a simultaneous influx of new members and also potential opt-outs. In comparison the in house administrator will only have the one set of arrangements and consequently one set of requirements and dates to manage.
In the run up to A-Day, the pensions administration market saw increased activity in terms of first time outsourcing. Do you think we will experience a similar response as we approach the introduction of auto enrolment particularly with the Pensions Regulator's focus on employer compliance? What do you think will be the key drivers in trustees decision to remain in-house or outsource?
Many trustees have already outsourced the administration of their pension schemes and consequently there is a rapidly diminishing pool of first-time outsources 4 years on from A-Day.
Many trustee boards are increasingly focusing on the governance of the scheme and the impending legislation may see these boards look to pass the increased administrative burden to an external party, however it is apparent that there is a considerable amount of apathy about the legislation.
With decisions arising from the review of the regulations not due until later in the year it may well be the case that organisations do not consider the decision as to whether or not to outsource administration until a point in time where it will be too late to make the change in advance of the legislation coming into effect.
by Daniel Jacobson
Client Manager