This article first appeared in Reward Strategy. It’s a thank you to the people in payroll who have made a boring pension person a little more chirpy!
Readers who went to the CIPP conference and award dinner, will know that I was recognised with a lifetime achievement award by the CIPP Board. They will also know that I didn’t show up – which might be interpreted as a snub.
It wasn’t meant to be: I was in Newcastle and this article is about what I think we can achieve – not what we’ve achieved so far! The CIPP’s recognition makes what I have in mind a little bit easier! Which is why I’m so pleased by the award. I’m so pleased, I’m not going to shut up about it, or about the CIPP or about payroll!
The expansion of those employers funding a workplace pension from a base of around 150,000 to its current level of around 1,000,000 presents an enormous challenge to those in pensions. The pension industry has been handed an extra 10m customers each contributing around 8% of average earnings (let’s round that to £2,000 pa per person). That’s a net inflow into fund management of £20,000,000,000 a year, which is a lot of money.
One challenge is to manage this money wisely. Another is to pay it back to people as they want it paid (we no longer talk of pensions – we talk of freedoms). Studies in Sweden, UK, Australia and USA concur that while people like the idea of freedom, most of us want our money paid to us as a wage for life, when we can no longer work, which is a pension!
So, payroll is not just involved in the payment of money into pension plans, but will be involved of the payment out. If I have done anything to deserve the award so far, it is to point this out to people who benefit from the money (the pension operators); they forget how it arrived and where it’s going!
But recognising the operational importance of payroll has not (so far) led to a shift in the mindset of pension operators, who still consider payroll as an accessory after the fact. Payroll pass the money – pension providers keep the value.
But my discussions with payroll software companies reveal a subtle shift in the value chain. Payroll has achieved something that IFAs and employee benefit consultants have failed to do; that is – charge employers for the use of auto-enrolment software. Employers are happy to pay for payroll software because they trust it to deliver – this is not always the case with pension providers;
The revenues from these contracts allow software companies to develop auto-enrolment modules into pension modules. The forward-thinking software suppliers see the provision of simple services within these modules as essential to the successful maintenance of compliant, well-governed and really useful workplace pensions. Collaboration can ensure employers offer good pensions as well as compliant auto-enrolment.
This is the reason I was in Newcastle and not with the CIPP. I want to help the 900,000 employers without access to pension support, as confident as the 150,000 who have pension advisers,
That means independent helplines for member queries, operational support for employers.
It means access to league tables that tell employers and members the value they are getting for their money (benchmarked against other providers).
It means offering remedy where things aren’t working, helping employers change providers and members move one pot to another (great big pot).
And it means keeping everyone up to date with what’s going on – a proper newsletter and at least quarterly reporting on the progress of providers.
To put it simply, I want employers to have peace of mind about their workplace pension.
I have 11 years between now and my state retirement age. I’d really think we had achieved something in my lifetime if every employer that participated in a workplace pension had access to these things.
I cannot see any way that this can happen except through the conversion of payroll managers into payroll and pension managers. I hope by 2028, when I hang up my boots, that the CIPP will stand for the chartered institute of payroll and pensions!
Work is boring, pensions are boring, but getting paid is never boring!