Rebooting the system

The Pensions Regulator (TPR) rolled out a trumpet fanfare on 12 March when it announced that a West Ham United employee was the three millionth UK worker to have been auto-enrolled into a pension scheme.

Fate no doubt raised a wry smile, given that the Premier League club’s vice chairman, business celebrity Karren Brady, has helped spearhead the government’s advertising campaign for the new pension regime.

Commenting on the milestone, Brady said that auto-enrolment would make a real difference to the retirement prospects of some of the “unsung stars at the club”.

Directors and staff from HR and payroll departments up and down the country may have felt a bit ignored themselves however, when Pensions Minister Steve Webb used the announcement to take the plaudits for the low opt-out rates that companies have experienced ever since the first staging dates arrived back in 2012.

Auto-enrolment, although a major success to date, has proved to be a major test for employers and their various service providers. For many, it’s been hard work. Consequently, not only has it opened eyes to the complexities of the process, but it has also made companies re-evaluate how they should approach linking HR and payroll – as well as everything in between – to ensure auto-enrolment runs smoothly in the future.

Lots of pain, some gain

“On the whole, implementation has been very painful,” says Jelf’s head of money at work Jo Thresher.

“Employers have almost laughed at the complexity, which has forced them to change their processes to catch all the possible employee scenarios in relation to enrolment.”

The intricacies involved within the 33 tasks mandated upon companies by the legislation, according to Creative Auto Enrolment managing director David White, result in an average of 103 manpower days being taken to deal with implementation.

And there was a misconception that auto-enrolment was all about pensions,” says Ink Employee Benefits director of sales and marketing Chris Everard. “It’s about systems and processes and communications and HR. The pension is the final product, but the journey to reach it is nothing to do with pensions.”

“Employers haven’t had the experience to fully appreciate the size of the task in front of them,” he adds.

No wonder then, says White, that the regulator recently revealed that it had some 590-odd companies under investigation at the moment.

“Of those 590 what percentage have already staged? Well it could be up to 20 per cent,” he says.

“These big companies will have been on it, but somehow some of them have got to a situation where the regulator is talking to them.”

For its part, the regulator is more than satisfied with how auto enrolment has panned out to date.

“Ninety-nine-point-nine per cent of employers who have completed registration have done so without the need for us to use our powers,” says a spokesperson for the watchdog, stressing that it has only had to use its statutory powers on six occasions so far.

Nevertheless, the fact that so many investigations remain on its books tells its own story.

But through the pain, says Thresher, employers have started to take a step back to look at the big picture.

“They’re starting to ask, ‘does this, or that, fit?’ And I think we’ll see a lot of activity in the next few years of people asking why they have what they have. At the moment, you sometimes ask them why they have ended up with a certain practices and they just don’t know.”

Keeping it simple

Tackling these legacies has made directors appreciate simplicity once more, says Aon Hewitt director Jon Bryant.

“Employers of certain size just like doing things their own way, and the market said that’s fine, Mr. Big Employer, you do it your way,” he explains.

The problem with that however, was that every large company choosing to implement in their own bespoke way added an extra level of complexity to the already tricky regulations.

“In hindsight,” he says, “it would have been better doing the bare minimum, and trying to do as much as possible in a standardised fashion to start with.”

Cutting out the middle man

When it comes to pointing the finger at processes that have made life harder for companies, the main culprits appear to be payroll providers and middleware.

Xafinity senior consultant Nick Rumble, is unimpressed by the service provided by many payroll providers. He accepts that the new PAYE Real time Information statutory requirements from HMRC have distracted payroll operators somewhat, but the resulting cursory glance at what was required from auto-enrolment has been frustrating.

“It has been surprising how few payroll software providers have stepped up to the plate with a robust well tested solution that works,” says Rumble. “Many are still woefully behind the curve.”

Given that payroll systems are playing catch up, this only accentuates the risks involved in using middleware. Running the right auto-enrolment checks on, for example, a weekly paid workforce, by dragging information from one payroll system into a different assessment one, and then back, is playing with fire, argues Rumble. The mistakes that can be made with employee information are too great.

Bryant shares the same concerns, stressing that auto-enrolment is, after all, a data processing issue, which should be handled on a payroll system alone – if it is up to the job.

“From a risk management perspective, sending it off to middleware, which then does an assessment calculation and then sends a contribution sum to payroll doesn’t make logical sense when the payroll system has the data in the first place.”

The most straightforward approach, therefore, is to reduce reliance on middleware and bring more payroll systems in-house, where possible.

According to Thresher the clawing back of systems has already started to happen. “I’ve seen employers taking more ownership then they used to. You want a system that really works and fits well with your organisation,” she says.

Double trouble

The final piece in the auto-enrolment jigsaw, the selection of a suitable scheme, hasn’t all been plain sailing for employers either.

Despite their ability to call on top advisers, administrators and the rest, companies have found pension providers to be a bit more reticent. In some cases, they have been reluctant to take on certain tranches of staff, for understandable financial reasons.

“There has been soft closure going on in the provider market,” says Rumble.

“One of our clients - a relatively large employer - had been talking to their GPP provider for over a year. They staged in September last year, put 700 new employees into the scheme, sent the schedule off and the provider turned around and said ‘we don’t want this’.

“So they were forced to start looking for a different pension provider after the staging date.”

Having extra schemes, whether through necessity or choice, has given companies another reality check, says Bryant.

“Some employers have underestimated the challenge of governing two or more schemes. It’s like having two kids: four times the hassle.”

It would not be beyond the realms of possibility therefore, that scheme amalgamation soon reaches the top of agendas.


Some companies, Everard says, have embraced the new regulations to bolster their overall employee benefits package and mark themselves as great places to work. Others have accepted, perhaps reluctantly, that they have huge numbers of new pension savers in their ranks and therefore should make the most of the situation.

“The low opt-out rates have caught employers out,” says Thresher.

“But it’s also made them realise that this is with them for life now and that they need to do it well.”

Marek Handzel is a freelance journalist

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