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Preparing for auto-enrolment
speaks to JLT Employee Benefit Solutions director Mark Pemberthy
about the ways companies can start preparing for auto-enrolment
Pensions Age (PA):
What has been your experience so far of companies that have already begun preparing for auto-enrolment? What challenges have they faced?
From November last year we had changes to the potential staging dates and the ongoing consultation around the different ways schemes can certify that they can meet requirements. Because of this, there’s been a reluctance to take any decisions and that’s really delayed some progress. But the DWP announcement earlier this year has really crystallised those issues and given a fresh impetus for companies to start looking at auto-enrolment.
So what technological solutions are there for companies in order to make this a bit easier, to help them prepare for auto-enrolment?
For virtually all companies, technology will be a critical element of auto-enrolment, either because of the scale of the number of employees or transactions that an organisation will be dealing with, or simply because of the complexity. Smaller organisations may not have the resources available to do that in a compliant way.
A lot of organisations will need to look at a standalone piece of technology and software, which will undertake all those processes by taking the data from HR and payroll systems, analysing it, giving the interfaces with employers and providing the pension schemes with the data that they need in order to have better records and create the pensions. Standalone products are being developed from organisations like JLT and other software providers coming in from places like Australia and so on.
It sounds like preparing for auto-enrolment will be a long process.
There are five very simple project streams that organisations can go through to make sure that they have covered all the bases.
Understanding exactly the financial impact of auto-enrolment for businesses is an absolutely key first step. So undertaking some detailed financial modelling to look at the financial impact for the next three to five years is a key first stage for organisations.
They can then move into analysing how that impacts on their pensions and rewards strategy. Can they just tweak the pensions proposition in line with auto-enrolment requirements, or from a budgetary or wider perspective does it have an impact on some other reward issues. For some organisations the financial impact is so significant that it even goes out of the reward issue and can potentially have an impact on acquisition strategy, growth strategy and wider corporate issues as well.
The next stage is to look at the practical issues with auto-enrolment. Have they got the right pension scheme and operational infrastructure to deliver auto-enrolment in a complaint way. Qualifying scheme selection is quite a big one. Because you don’t really want to go back and start unpicking all your auto-enrolment work in a year’s or two’s time simply because you do not have the right pension scheme.
Looking at the processes and any technology requirements needed to underpin auto-enrolment are absolutely inherent. That’s not necessarily just a pension issue. That’s likely to have an impact on new hire processes. It may also impact the ‘business as usual’ process in terms of promotion processes and so on.
Finally, you have the task of communicating that to employees and implementing it. We see these processes taking at least 12-18 months from start to finish
So would you recommend that companies begin work a couple of years before their staging date?
The largest employers are staging in less than six months so they are well on top of what they need to be doing. But we see a big pick up in the number of companies that will have to be ready for auto-enrolment by the end of next year. So those organisations are now coming up to that 18 month window and if they don’t have their preparations well underway now they really need to start taking action. What makes auto-enrolment a very difficult project is that those deadlines are fixed; you can’t push it back a couple of months. For more information please visit http://www.jltautoenrolment.com
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