The debate on auto-enrolling nannies into workplace pensions is being called #Nannygate. The FT have quoted Anne-Marie O’Leary of Netmum as saying nannies and their bosses are in “a state of near panic” at the prospect of enrolling
Nannygate has even drawn a letter to the Times from Ros Altmann, the new pension Minister, making it clear the lady’s not for turning. Nannies are going to get no special pleading.
So what’s all the fuss about?
Firstly, the challenge from Netmum is likely the first of many. The Pension Minister’s clearly wanting to be tough from the start.
Secondly, the particular circumstances of nannying as an employment highlight the predicament for employees who move through a variety of jobs.
Pot follows – nanny?
Nannies tend to change jobs once every five years and typically look after children from up to 10 families in a career.
From now on, nannies will become eligible for contributions to workplace pensions set up by their bosses – the parents. So nannies can expect to build up 10 pots.
Expensive and clumsy to manage, we are facing an explosion in the number of pension pots in the UK.
Some pension experts see this as an opportunity to test the Government’s resolve to introduce “pot follows member”.
If the DWP’s after getting pots to follow members – why not start with nannies who are, by the nature of their work, job-hoppers.
Why not encourage the nanny to ask the new boss to set up your old pension as their workplace scheme?
The Payroll lottery?
Sadly, it’s not as simple as that. You may be in NEST with boss #1, but boss #2 may be powerless to help you. Payroll #2 may refuse to interact with NEST.
If you talk to payroll (and we do) you’ll find that each payroll software provider and each user of that software have sweet and sour relations with pension providers and there are payrolls who refuse to support payments to certain providers.
This state of affairs is made worse when a payroll software provider or bureau strikes a deal with one provider to be its default.
So whether you can get your new employer to support your existing workplace pension may come down to what payroll support they are getting.
Choosing a pension could become a payroll lottery.
The wizards of Oz.
In Australia your pension follows you around and that works because of hubs like Super choice which take contributions from an employer and clear them to a variety of “Super schemes”.
We had the chance to replicate this at before auto-enrolment started but the idea never got off the ground. It’s a shame it didn’t but we have to work with what we’ve got.
What about PAPDIS?
It should be possible for our payrolls to use a common interface with all providers. This exists and is known as PAPDIS.
But for PAPDIS to work, there needs to be a way of mapping the data on the PAPDIS file into the provider’s record keeping systems so that the right money goes to the right nanny account at the right time. Work is underway to make this happen, this is the plumbing being done by Pension Sync and others so that PAPDIS can be adopted by all providers.
But this is not the end of the problem
Many parents will employ first time nannies – nannies without a pension or a clue what pension they want. Nannies needn’t worry, under auto-enrolment it is the boss who needs to choose. But what if the boss has no more of a clue than the nanny?
Bosses will need a way to choose a pension which is right for their nanny, for them and for their payroll. That’s not as easy as just listening to what payroll wants.
Nannies have every right to have a pension scheme chosen for their benefit – after all it’s their retirement! Employers will not want to get caught up in conversations between moaning payrolls and moaning nannies, they need guidance on what works for everyone.
The technology to help make these informed choices is not widely available yet – it needs to be easy to access and at minimal cost to such employers.
There may be three lessons for us here.
- Without improved technology employers will not get choice of workplace pensions.
- If there is no improvement in technology then pensions won’t follow members.
- Without informed choice, the suitability of the pension is a payroll lottery.
When I was CEO of the then Pensions Regulator (Opra) I employed a nanny and offered her a Stakeholder pension- which she took up – ran my own payroll (of one) and had no problem making the contributions and deductions.
But you were the head of Opra so probably understood more than an octogenarian with mobility issues and cognitive impairment.
Very good Caroline, but if that were now, would you have known to check her age, residency status and qualifying earnings to establish what type of worker she was, set up a qualifying scheme and send the correct statutory notifications within the prescribed deadlines from staging?
I expect Caroline would have used a service such as http://www.pensionplaypen.com which would have provided her with a free workforce assessment (of one!) and the options available to her and her nanny by way of workplace pensions.
If she were to use our soon to be introduced nanny friendly version, she could also get the pension set up for her and a proper report on the pension choice she took for less than £100.
Most nanny payrolls (including the market leading Nannytex) provide ongoing pension support and though all this may not be ready for the nannies caught in the June 2015 trial, we (www.pensionplaypen.com) hope to have all this in place from the beginning of 2016.
Thankfully, the small start ups like pension playpen and pensionsync, the bureaux like Nannytex and payroll software suppliers like QTAC (who supply Nannytex) are working well to make this happen.
Now we need the big pension providers to get joined up! – Duncan!
The cost of selecting , managing
Tapper to the rescue for under a £100 quid – hurrah! Thankfully there are as you say Henry, a growing number of software tools that will allow those fortunate enough to have nannies (and find the right websites) to comply with the legislation and choose a good pension for their staff. They will of course need quite a few more £100’s before they’re done! …and whilst I can’t obviously speak on behalf of all the big pension providers, my Employer is actively engaging with the payroll industry to move this forward as fast as possible.
But are there Duncan? Can you tell me a website that helps people to choose the right pension in a meaningful way?
You are quite assertive about this but I don’t know why!
Nannies are the tip of the iceberg but in many ways have an advantage because generally their employers are better off to contribute to a pension. This situation is already filtering through, not because of pension legislation, but as a result of Welfare reforms and there will be many other cases caught up in the auto enrolment arena. Many such cases have come to light due to changes in NHS benefits to the infirm. Previously, if they needed home help then the NHS or Local Authority would have provided someone. Now though, the benefit is paid to the patient who then has to employer the Carer and hence the patient become the employer rather than the NHS or LA. However, the benefits have not increased so the patient has to find the extra money in addition to making arrangements to enrol the Carer. I do not believe for one minute this situation was discussed or even thought of when AE was evolving but it is real and here right now.
At GenLife we have such cases coming through our systems and we have helped payroll bureaux simplify the process by giving them access to an online pension portal to easily add each employer (patient) and their single employee; we don’t discriminate on the size of employer. We will do the same for Netmums and their Nannies.
GenLife is also the first to join up with QTAC in providing a streamlined solution from end to end, Payroll to Admin and funds.
Ros Altmann is right to confirm all employers will be treated the same for pension provisions but other Gov agencies need to be aware when they change procedures to reduce their salary bills by putting the burden on the recipient that there are other implications and obligations as a consequence and they should factor in the cost they are imposing on others.
As far as compulsory pot follow member I am not a fan. Any of these ’employers’ going to Nest this will not happen as they will not be able to transfer out. My case against any compulsion revolves around the charges and investment returns. What if en employee changes employer only to find he/she has moved from a scheme with an mac of 0.3% to one which is close to the Cap of 0.75% and worse still has a poor investment return when their original scheme was performing well. Who is going to pick up the blame, well not the Government for sure! Without any Advisers this time round there won’t even be a possibility of a pension review like in the ’90s. Yes make systems compatible for easy transfers but don’t make it compulsory, opting-out is not good enough as members won’t have the information, expertise or time to be able to make the decision.
Local Authorities and I’m assuming it’s the same for CCG’s (or PCT’s or whatever it is these days) have a legal duty to provide sufficient funds to service users/patients to meet their legal duties. Clearly pensions and the cost that goes with them are a legal duty -The Pensions Regulator website makes it clear that they have no doubts on this themselves. What should be happening therefore is that any governmental body providing direct payments/budgets should ensure that the employers on the sharp end have the funds they need.
As a positive realist however, I’m aware that the 2 worlds of ‘Should’ and ‘Real’ are not one and the same, so it will be interesting to see how the points Bob raises play out in the Real world.
The big issue to my mind is that this group of employers do not all have the IT skills/equipment to cope with an entirely online process. If you are confident online, then the information that is available from TPR and the Pensions companies is laudable. If you’re the other side of the great digital divide however (and many of these employers are) then ‘Care-gate’ might beat ‘Nanny-gate’ hands down in the disaster stakes…
Putting aside the pot follows nanny issue which I struggle to see ever becoming workable, to answer your question Henry, I was referring to the availability of worker assessment tools as opposed to pension scheme selection. I agree with you that there aren’t many of the latter available that provide meaningful analysis. The position is as clear as mud for most Employers which is worrying as the default isn’t currently pointing towards the quality end of the market!
The workforce assessment is important- every pay period. The choice of workplace pension is important and should be made once.
The reason there is so little help on the selection of workplace pensions is that it does not provide annuity income.
As usual the customer comes last – not TCF but FTC – F**k the Customer
On the contrary I believe the customer (the Nanny) is getting a great deal! The regulator has gone to great lengths to ensure that “FTC” will not be the head-line reason for failure of such a huge social experiment.
In doing so however, they have put a heavy burden on Employers of all sizes, and on Industry to develop the technology infrastructure needed to cope, which it hasn’t (yet!) The choice of workplace pension is important as you say Henry, but the bigger issues are now about helping Employers to cope with complexity and the lack of infrastructure.
The relentless work you have done in trying to bash heads together and get the right people talking to each other has been invaluable, and I applaud it.
Lol – from 14 August 1999: http://www.independent.co.uk/life-style/personal-finance-its-your-future-thats-at-stake-1112529.html
“Wendy Beaver, a consultant with William M Mercer, says: “If you’ve got an employed relationship with a nanny or a cleaner, then you will have to provide access to a stakeholder pension. Your employee can then say they would like you to pass over their contributions direct, and you have to provide a payroll facility to do that.”
The news that nannies should be properly compensated is not new news – but in the pension industry, sixteen years might be viewed as speedy 🙂
Amazing that it has taken us so long to move on!