The Chartered Institute for Payroll and Pension Professionals and their “Friends of AE” stitched me up with writing up the output of a working group comprising a lot of old’uns and a couple of delightful “young’uns”.
Here, for the general enlightenment of others and the particular enlightenment of the working group , are the results of our 30 minute deliberation on 10 questions that we had been asked.
I got talked into doing that flip-chart thing, then as no-one could read my writing, I had to do the 5 minute “this is what we agreed” thing- (yeah nightmare!). Then when it couldn’t get much worse , I had to do the write up (which is why you’re reading this).
Thankfully, we have agreed that we will be feeding – like a good tributary – into a much wider river which hopefully will disgorge into a welcoming sea (see Anything Else?)
Our understanding is that a group with the dubious acronym “BIB” comprising various payroll software companies, the Inland Revenue and a bunch of provides will be reading this.
With a bit of luck , they’ll pack up their laptops and take the afternoon off- we’ve got this one nailed.
The ten questions were;-
- What data are we talking about?
- Are data standard possible?
- What’s the best way forward ?
- Who are the winners?
- Who are the losers?
- What will it cost?
- What will it save?
- Should the DWP make this a qualifying standard?
- Has this got any bearing on “pots follow member”?
- Anything else?
Anything else ……in 30 bleeding minutes????
Well we tried – and this is what we came up with.
What data are we talking about?
Well all of it should be subject to standards but to make this project manageable we’ll need to go for quick and attainable wins. In the long-term we’d like to see standardisation of workforce assessments in payroll and we’d like to take on pot follow member , but immediately we need to tackle the enrolment data and contributions (concentrating on thorny data issues such as opt-outs, corrections and ensuring that historical data is maintained for audit purposes and so it can be transferred in bulk at corporate events.
What we are talking about is “Ease of Use”
Are data standard possible?
We studied two cases; the first was Origo’s failed attempt to get the workplace providers to agree common templates for receiving and giving data in auto-enrolment. It was thought this project was derailed by the slow uptake of the participants. The group had needed critical mass but went for universal agreement, had failed to find commercial alignment between all players and found each of the participants wanted to move at different speeds
By contrast the Via Nova project which established common messaging standards for investment administration delivered much in a short-time as a result of key participants (L&G and Towers Watson) showing leadership, attaining critical mass and driving the market to follow. They created a compelling business proposition for others to fall in line with
What’s the best way forward ?
We concluded that the best way forward was to concentrate on what was immediately achievable, show leadership and drive change from the front. Consensual models are ideal but are unlikely to deliver in the tight timescales ahead. It was acknowledged that most “players” do not have budgets or capacity for voluntary change, some kind of “force majeure” will have to be at work.
Who are the winners?
We discussed whether any of us can afford to get this wrong. Ultimately if data falls over, auto-enrolment falls over so without a “fix” we are all losers and with one “we have auto-enrolment”
Among providers, these reforms will benefit the “money bucket” providers who just receive contributions and offer relatively little HR and payroll assistance/ By and large these are considered master trusts though there was debate and a straight “master trust win, insurer lose” distinction is too simplistic.
We felt that these proposals will enable more providers to stay in the market, which will be good for consumer choice. In the long-term, the price of auto-enrolment compliance will fall and while this is supposed to be paid by the employer, we know that ultimately that cost gets passed on to members in lower contributions or lower wages. Consumers will benefit from these changes in the longer term.
But in the short term , this is about payroll and payroll will be big winners. Payroll is always an employer issue. If payroll costs are maintained in manageable proportions as a result of an investment now, then employers will be able to afford auto-enrolment. If payroll costs (and associated middleware) continue to escalate, the smaller companies, which do not benefit from the economies of scale that larger employers can generate, will find the burden of auto-enrolment increasingly burdensome.
If auto-enrolment fails, it will be because the SMEs and micros cannot manage it.
Who are the losers?
In macro-terms ,those who don’t want auto-enrolment to work, most especially those who have taken bets on it not working.
To some extent, those organisations that have invested heavily in delivering flexibility. These might include payrolls which have already built multiple interfaces, middleware providers and pension providers with “hub” solutions that can (and are) being sold to the market at a profit.
What will it cost?
We have no way of knowing what this will cost. Whatever it costs will be “too much” for providers claiming the cap has already cut margins to the bones.
The main cost will be in people’s time. How do you value that in the context of peak capacity (there was some regret here that we hadn’t addressed these issues when we had the chance a couple of years back).
What will it save?
Whatever it costs, it is likely to save much more. As noted above, we cannot afford not to do this.
Should the DWP make this a qualifying standard?
We think not. The granularity of the regulations that would need to prescribe the standards do not sit easily within legislation. We favoured a voluntary code of practice adopted by the big players (Sage IRIS, some of the providers) which will drive the industry to follow
Has this got any bearing on “pots follow member”?
If you can achieve this, you can achieve pot-follows-member. While we recognised the political and consumer imperative to sort PFM, we think it’s a scheme to scheme issue and therefore not on the critical path for this project
We didn’t consider that as a group we can deliver data standards, but we can feed like a tributary into a wider project. The BIB project can be informed by our thinking and other projects such as the Origo work can also feed into the large river of a BIB led group.
Our group comprised
El supremo – Martin Freeman (the other one)
The sporting Steve Preston
Regulator Rebecca Worsley
The dashing Ed Holt
Kathy “Dick” Turpin
Nick “standards” Green
Mike @Nest Kelly