Since auto-enrolment works on the “least said the better” basis, there is a temptation for people involved in its supervision to take Ronan Keating’s advice –
“you say it best- when you say nothing at all”.
But complacency is what got the occupational pension schemes struggling with data cleansing, into trouble and it will get many providers, payroll software companies and indeed employers into trouble – if data issues are not addressed now.
PensionSync are not the first to address the issues of data accuracy; voices such as Kate Upcraft’s have long been warning of the issues detailed below. But PensionSync have now a significant share of the market and – in Ros Altmann – a way to project concerns into the policy sphere. Here’s what PensionSync are saying (text in italics is from a recent press release from Pensionsync).
Auto-enrolment now covers all employers, but are the pension records already wrong?pensionsync research reveals up to 50% error rates in auto-enrolment data for small firms, but organisations that use pensionsync achieve 97% success rates
Organisations prepared to use the pensionsync interface – which is a free service – are running fewer risks; there is no obvious reason not to engage with Pensionsync. This is why
Regulations only check employers are paying into a scheme, not the accuracy of information. As the pension MasterTrust market consolidates, there are significant concerns about reliability of records being transferred
Legacy pensions are plagued by errors from past manual records,but today’s auto-enrolment can use digital integration to ensure accuracy – and cut costs
Hidden data problems:
Failure to embrace new technology risks repeating problems of legacy pensions:
Pensions have often been plagued in the past by high charges and poor customer experience, and most recently many pensioners have had to repay some of their pensions and face pension cuts, as they are told that past errors in their pension entitlements have been discovered – many decades later. The errors in the pension data were often the result of manual record-keeping, which was prone to human error, and a failure to ensure robust data reconciliation was regularly carried out.
This meant that errors were not discovered promptly and persisted over time without anyone knowing.
Workers need to trust that their pension contribution records are accurate:
Pension rules are so complicated, it is almost impossible for most workers to know whether the amounts being paid into their pensions are correct. Complex calculations are required to calculate the employee contribution, employer contribution, tax relief and possible National Insurance relief.
Employees would naturally expect that their employer or pension provider were ensuring the amounts being recorded were accurate. Unfortunately, this was not the case in the past, especially with contracted out pensions.
However, it also appears that this issue is still a problem even with new pension schemes.
Shocking 50% error rates revealed by new statistics:
Pensionsync has analysed data, representing contributions to over 10,000 schemes. This research reveals, shockingly, that data sent on behalf of employers to pension providers have a 50% error rate and must be sent back for correction. Such high error rates suggest the need for greater attention to be paid to data accuracy by pension administrators or employers themselves.
High error rates add costs and time to pension administration: The requirement to send data back for manual re-entry also implies that the administration of Workplace Pensions is highly inefficient, which will result in increased costs for employers, payroll firms, book-keepers, other third-party providers and also for pension providers in terms of customer support. Each time a data error occurs, there is extra work for the payroll or pension administrator. With such huge error rates being common, the costs of pension administration and the time taken to submit the information to pension providers is much greater than necessary.
Even more worrying, it seems to be the case that some administrators simply find a way to ‘fudge’ the pension information by editing it within Spreadsheet word processing software tools to get the job done rather than address the root cause data of the errors within the source software system (which is typically payroll software).
Furthermore, when pension providers change their data requirements and payroll software is not updated to reflect the latest version, then administrators have little choice but to manually adjust the data in a Speadsheet, or manually key data directly into a pension providers web portal.
Common errors include:
• contribution amounts that are too high or too low;
• contributions made for workers who do not belong to the scheme or have opted out,
• wrong pension scheme identifiers,
• inaccurate postcodes,
• incorrect pay period dates and many more.
Furthermore, the pensionsync team has observed other examples of pension administration issues relating to contribution errors resulting from employers or their agents incorrectly believing a pension scheme operates on a Relief at Source basis rather than Net Pay, and vice versa, and so confusing gross and net figures.
Current regulatory checks do not ensure verification of data accuracy: Following the significant problems caused by inaccurate records in legacy schemes, surely it is vital for the pensions regulator and Government to ensure data in new auto-enrolment pensions are regularly and comprehensively checked for accuracy. Currently, this is simply not happening.
The auto-enrolment Declaration of Compliance does not require a confirmation that the pension contributions and employee pension records have been robustly verified as accurate.
There seems to be no checking of member data accuracy by most providers. Indeed, many providers could not even check whether contributions are correct if they wanted to, because they do not collect the relevant information on employee pay.
Master Trust consolidation needs reliable records.
As pension MasterTrusts are in theprocess of consolidation, the risks of pension records already being incorrect, revealed by thelatest research, are most worrying.
Master Trust authorisation did not require robust checks on data accuracy or proof that there are proper processes to discover and correct errors. It is essential that such processes are urgently introduced to regularly check that pension data are accurate and reliable.
Once time has passed and if schemes merge, it will be much moredifficult to go back and try to reconcile past records. Surely members should be able to rely on the information on their pension statements?
CEO Will Lovegrove and Ros Altmann (Pensionsync’s new chair) deserve our support in their efforts to bring these issues to wider attention.
Ros campaigns tirelessly for the restitution of Government Incentives to the low paid who miss out if they are unlucky enough to contribute to a “net-pay” pension scheme.
Ros is now in a position to publicise the problems that PensionSync (and others) are identifying with data.
These issues will not bring down auto-enrolment, but unless we lose our complacency and adopt the technology that PensionSync represents, then auto-enrolment may become another branch of pensions that falls into disrepute.