Pensions are important. They occupy our press, parliament and they occupy payroll! For better or worse we have wedded payroll to work and unless you are on a payroll, it is increasingly unlikely that you are earning much more than credits for your state pension.
This link between payroll and pensions is nothing new, but it has suffered a sea-change since the introduction of auto-enrolment (nearly five years ago). We are now approaching the five year review of auto-enrolment which is being led by three pension heavyweight (with little direct input from payroll). I have commented on this to the Pensions Minister and others.
Not only has the success of auto-enrolment been a payroll success, but had payroll not stepped up to the mark, I very much doubt the pension industry would have delivered a compliant and robust series of processes capable of managing both “staging” and steady-state contribution processing. I hope that the auto-enrolment review will acknowledge the debt pensions owe to payroll software providers and the accountants and their payroll bureau who have helped so many small employers across the line.
At the time of writing, I am looking forward to Accountex and Sage Summit. At both events I speaking (at Accountex thanks to the CIPP). At both events, it is now quite natural for payroll to be authoritative on pension administration. The Pensions Regulator has for some time acknowledged that payroll is critical to AE success and it’s great to see that Charles Counsell (who heads tPR’s auto-enrolment division) is speaking at Sage Summit.
My company’s got a dictum ” a pension’s for life not just for staging” and as we bed down the 1.5m employers who will be participating in workplace pensions by the end of the decade, we now need to make sure that the small number of workplace pensions with whom they are participating, are doing what is expected of them.
As contributions hike up in April next year and April 2019, the question on people’s lips will be about where all the money is going and how the workplace pension providers are performing.
In the past, the pensions industry would have been slavering over the prospect of offering benchmarking services, performance analytics and governance services. But with auto-enrolment things have turned out differently.
The abolition of commission which began with the implementation of the Retail Distribution Review in 2012 and was completed earlier this year where legacy commission was turned off for all schemes, means that pension advisers have no choice but charge fees either to employers or their staff. Large employers – with a history of paying for pension advice, have continued to use advisers, but the bulk of the employers engaging with workplace pensions for the first time have been reluctant to engage financial advisers and pay their invoices.
The Office of Fair Trading had told the Government in 2014 that ordinary people found pensions too difficult and that they would need help. The Government’s response was to require workplace pension providers to raise their game.
Insurance companies were required to set up Independent Governance Committees, Master Trusts will be required following the enactment of the Pension Schemes Bill to radically overhaul their self-governance. The aim is to offer ordinary people an independently derived measure of “value for money” which allows employers and members to be clear about how good a job their workplace provider is doing.
The shift towards these new pension governance structures should be good news for those involved in payroll. The IGC and Trustee Chair reports are short, readable and informative and should provide employers with the information their staff need to feel confident about “where the money is going”.
The best workplace pension providers are investing in these governance committees, not as an extension of marketing, but as a mirror showing them how they look and as a way to show they are independently accountable to the employers who have chosen them.
As yet, few of these Chair reports are being read, but as more money flows into workplace pensions, I hope they will become increasingly popular. Smart payroll people will make sure they have access to a copy of their workplace pension’s report and that the information it contains is presented, in a suitable way to staff who are members of the workplace pension plan.
In a space that is currently empty of experts, this is payroll’s chance to show some expertise (without really having to try!).