From October, the new employer responsibilities introduced by the Pensions Act 2008 and 2011 will start. These changes will completely alter the face of the pensions industry in the UK. From this date employers will have to start automatically enrolling their workforce into a qualifying pension scheme. Although the staging dates for smaller companies have been put back, with the DWP currently consulting on the detail of this, auto-enrolment will still happen and so employers need to understand the implications of this.
One thing is for certain – the regulations are extremely complicated and hard to follow. Employers need help and advice to understand what they have to do. They’ll need to regularly assess their workforce to check who should be automatically enrolled, who has the right to opt-in and get an employer contribution and who has the right to join. Circumstances can change too so an employee’s category changes. Employers need to be on top of this. And to do this they need to understand the rules and constantly monitor the situation. This will be a particular challenge for smaller employers who won’t have the resources available to do all this. The good news is they don’t have to do all this themselves – help is at hand. As well as getting support from their scheme adviser on what the changes mean for them, technology solutions are emerging that can help employers meet their obligations under pensions reform.
Streamlining the auto-enrolment process
These solutions being developed by advisers and providers are often referred to as ‘middleware’ and they streamline the processing of all the different stages involved in auto-enrolment. At AEGON, we’re developing an auto-enrolment hub that will help support new and existing clients in a number of areas:
• Facilitating categorisation of workers
• Communicating with workers in line with the legislation
• Managing auto-enrolment
• Managing the opt-out and opt-in process
• Managing re-enrolment
This type of technology solution is effectively your client’s window into auto-enrolment and offers the following:
• It takes payroll information provided by employers and uses it to facilitate communications to workers, relative to their category (i.e. eligible, non-eligible, entitled)
• It collects opt-out data and feeds this back to the employer
• It will become the administrations system to manage re-enrolment for the future
• It will integrate with existing payment management systems
• It will facilitate the payment of contributions to NEST should an employer choose to run an existing scheme alongside NEST (i.e. a segmented approach) These systems have been designed to ease the burden placed on employers by the legislation and minimise the time and effort required to meet their obligations.
Effective and engaging employee communications
One of the key aspects that middleware technology can help with is the communication to employees. Auto-enrolment presents a significant communication opportunity to engage with employees. Communication will heavily influence how employees feel about being automatically enrolled into their company scheme and subsequent success. The legislation is quite specific about the type of information that needs to be provided to each category of worker and a full audit trail needs to be available to demonstrate that these communications have been issued to the correct people at the correct time. Doing this manually would be a significant challenge but managing this through a middleware solution will streamline the issuing of these communications as well as providing a full audit trail should it be required at some point in the future.
Delivering a solution to suit your client’s needs
It’s important to understand the role that these middleware solutions fulfil. They are there to facilitate auto-enrolment and the related aspects of that. They are not there to replace existing systems such as adviser platforms or provider payment management systems. On the contrary, they should complement and integrate with existing systems. So whether you already have your own platform in place, are developing your own offering, or are looking for providers to support you and your clients in this area, all systems need to work effectively together. Early engagement with your clients is key so you can fully understand their needs and offer a solution that works best for them.
This communication is aimed and directed at professional financial advisers only. It must not be distributed to, or relied upon by, retail customers.