Don’t forget the micro employers. Payroll has to cope as seemlessly as now, including on switches.
— andrew young (@glesgabrighton) October 20, 2023
Thanks to my Glaswegian friend. Not only are payroll people key to workplace pension operations – but they know more than most about the value pensions give us for our money. In terms of the member’s experience, they are the touchstone.
I spent two days in Manchester at the PLSA annual conference. The keynote speech was delivered by Nausicaa Delfas, CEO of the Pension Regulator. At the heart of her vision for the future is that the 11m auto-enrolled savers into workplace pension get value for their contributions.
As I’ve written before, the assessment of Value for Money comes down to two things- the outcome of your saving (the pension) and the experience people have when saving. That experience includes the experience of the employer in its interface with workplace pension provider.
TPR is resolute, if your workplace pension is uncompetitive on charges, under delivers on investments and provides a poor quality of service, it does not give value for money and must be changed (“ditched” as a recent Financial Times article had it!). That’s all well and good until you consider the practical implications of swapping a provider.
Who is going to tell staff that their old pension (the one chosen by the bosses) has been put in special measures and will soon be replace by another?
Who is going to decide that the value for money of that “other” pension will be any better?
Who is going to manage the operational issues concerning contribution collection to the new scheme?
The answer for most smaller companies, is likely to be payroll. TPR knows this well!
In the absence of dedicated pension managers or even a pension-savvy HR team, nobody knows more about the member experience than payroll. Not only is payroll entrusted with keeping a scheme compliant with the auto-enrolment regulations but it is the first port of call for members of these pensions looking to opt out/in or make changes to contributions.
If things go wrong, as thankfully they nowadays rarely do, it is payroll who inevitably sorts out mis or non- allocation of contributions and it is payroll which deals with the frustrations of staff who typically find workplace pensions “difficult”. Executives need help with their annual allowance, the low paid need help with benefits and everyone benefits from a payroll department that understands and operates salary sacrifice.
Because payroll practitioner network with each other (not least through the CIPP) they share operational experience. If you want to know which workplace pensions to avoid, ask payroll.
So I think there is a prima facie case for payroll to be involved in workplace pension decision making if only to opine on the operational interfaces maintained by the provider. But smaller companies – for whom bureaux are so important, the experience of payroll whether in house or outsourced should be central to the workplace decision.
In the early years of staging auto-enrolment, workplace decisions were often advised by pension professionals (who did not always get it right!). But both the FCA and TPR have made it clear that choosing a workplace pension is not a regulated activity and can be done by any function of an organisation. Payroll are not precluded from choosing workplace pensions for their staff by regulation, even if the choice is an FCA regulated product.
But choosing a workplace pension based on “value for money” requires access to information. There is a lot of information in the public domain that should help make informed decisions. Sadly, this information is not currently available in a centralised simplified format. However, this is likely to change with the advent of the DWP’s Value for Money assessment service which will require all workplace pensions, including those run purely for one employer, to be compared in one place. The Government has yet to decide whether this central intelligence depositary will be managed by the Government or offered by the private sector, but it will be available to payroll.
I expect to see savvy bureaux and well-resourced in-house teams to find ways to make sense of the information available to them, It may well be that websites such as Pension PlayPen are repurposed for what the pensions industry call the “secondary market”. In a digital age, the barriers to entry for such services are low and their capacity to empower payroll high.
Payroll has always been the effective manager of pensions. I hope that it will be entering a new era where it informs on value for money from its own experience and sources the right pension options, by using technology that levels payroll up to pension experts!