Fidelity may not be an organisation many advisers immediately consider when it comes to DC pensions. The company keeps something of a low profile with its distribution efforts primarily focused around the major EBC firms. Despite this, over the last decade it has built up a significant market share among schemes for larger employers.
With auto-enrolment set to transform the pension landscape over the next few years it is becoming increasingly obvious that a key factor in provider selection will be the extent to which systems can help employers meet their obligations under the legislation. Many companies talk about constructing such services but Fidelity recently became the first to actually show me what it is building.
Since the advent of online collections systems, pension contribution processes have been mainly built around the payroll process. With auto-enrolment, however, there will be a need for the process to begin earlier. There is the requirement to write to an employee making them aware of the pension arrangements they will be entered into, within seven days of commencement of employment. This means employers will need to act on such situations before payroll files are created. This may initially seem a minor change but when explored in more detail the impact is significant.
Fidelity’s solution has three components – the initial data collection, workforce management including the process to work out eligibility and manage enrolment, and an improved online experience for members.
Within the workforce management area the submission management section shows each individual’s progress. If an employer wants to take all three of the above services the employer will submit an employee data file for the whole workforce (far wider than currently), so the eligibility of employees can be ascertained. As part of the service it will automatically manage re-enrolment.
The information obtained determines eligibility and enables both immediate and future dated enrolment, including sending the enrolment letters to members. Postponement is covered, as well as communication with non-eligible employees. Re-enrolment and continuous monitoring are managed, with reports being available to meet regulatory requirements.
While there are three categories of individual where the employer has auto-enrolment duties – eligible employees, non-eligible jobholders and entitled workers – Fidelity has identified nine categories into which these can be grouped. The system will allow the employer run configurable reports about each. The system provides detailed information to be used in the payroll process of all employees who need to be enrolled each month.
By using a service which is delivered by the pension provider, as opposed to a third party payroll or flex system, Fidelity can provide pre-enrolment access to the individual member service to allow members to explore their scheme immediately rather than waiting until eligible to join.
A three-part process is provided for the employee where they review their personal details, decide if they wish to make any additional contribution and if they want to accept the default investment choice for the scheme or not.
Both the workplace management level and pre-enrolment can be configured so the employer can choose if they wish to offer early enrolment, contribution rates for the scheme and the default investment choice. A further range of tools are provided to support these activities.
The system could potentially be used by employers who also put part of their employees in Nest but it would not identify which individuals would be in the Fidelity system and which in Nest. Apparently this is a conscious decision based on feedback from current Fidelity DC customers.
Personally I suspect it is something that they will be revisiting in the future as I believe there will be many organisations who would find such capability useful.
Fidelity has clearly put a lot of time and resource into developing a system that should significantly reduce the burden on their clients as a result of auto enrolment. Having got the system to market so promptly in advance of the implementation of the new rules the company have clearly set a benchmark against which other players will be judged. I expect to be looking at many similar services in the months ahead as I expect employers will see such support as crucial as auto enrolment begins to bite.