Payroll follows member!

English: Steve Webb MP makes a speech at the L...

English: Steve Webb MP makes a speech at the Liberal Democrat Autumn conference 2008. (Photo credit: Wikipedia)

There is an unholy row going on between the NAPF on one side and the DWP and the ABI on the other centering on whether the average Joe wants the pension “pot” from his former employer to follow him to his new job or stay with his old employer. To put it in a nutshell, the NAPF want the pots to stay where they are or be sent off to NEST and the DWP and ABI want them to be passed on to the new employer.

As usual, this conversation is going on without any contribution from the payroll community who will quickly twig that the administrative burden for this will fall on them, like auto-enrolment and  RTI.

Who will win? Well Steve Webb was bullish when he claimed that the DWP’s vision would be in primary legislation by the end of this parliamentary term (Second Sight HR leadership Summit October 16th).

Why is Webb bothered? There’s a lot more to pot follows the member than tidying up a member’s pension affairs.

The hidden agenda is that for pensions to transfer from plan to plan, there needs to be a level playing field with an even quality of scheme on both sides of the transfer. In a coalition terrified by market intervention, pot-follows-member is Webb’s best bet of ridding auto-enrolment of duff pension schemes.

The ABI are more than keen on a compulsory transfer system if it gets them out of having to administer small pots and converting them into tiny annuities.

The NAPF argue that the system of compulsory transfers will diminish pots (through transactional charges) but nobody seems to have stopped to think of the operational angle.

Who is going to do the signposting to link an employee’s old and new scheme together? When a member leaves, all that a pension provider knows is that contributions have stopped – but they could have stopped because of an opt-out or maternity leave or the taking of a sabbatical.

It looks as if Pot-Follows- Member will introduce yet another “employer duty” to be dumped on payroll. Payroll managers can look forward to holding two new fields on their staff’s payroll record – who he used to work for and who he’s off to!

Or is this one more opportunity for the suppliers of middleware to create another loop de loop for employee data?

 

About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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