Is your data ready for re-enrolment?

Jan 27, 2016

Robert Barksfield says schemes need to make sure their systems are ready to deal with re-enrolment at a glance.

  • We have passed the third anniversary of auto-enrolment, which means the larger employers now have to start re-enrolling staff
  • Easements in legislation have made re-enrolment a different procedure to auto-enrolment.
  • Employers need to review their records and processes to ensure re-enrolment goes smoothly.

Auto-enrolment (AE) is now more than three years’ old and Britain’s largest employers are facing the challenges around re-enrolling their employees for the first time. While there has been much talk of a ‘business as usual’ approach to re-enrolment, many employers could be in for a nasty shock if they miss the opportunity to streamline systems and prepare sufficiently ahead of their re-enrolment dates.

Beware the spectre of re-enrolment

Easements in the legislation have made re-enrolment a different (and ironically more complex) procedure to auto-enrolment three years ago. Employees who have opted-out within 12 months of the re-enrolment date, those already an active member of another scheme, and individuals set to leave a business are exempt from re-enrolment.

Employees with a tax-protected status can also be exempted on a discretionary basis, and these groups must be assessed against eligible employees, including those who had previously opted-out during the initial AE.

When AE was introduced, payroll providers were still reeling from the introduction of real time information, with some systems being more prepared than others. This meant many employers were often using myriad solutions in some cases, which undoubtedly resulted in imprecise, and in some cases conflicting, data.

Alongside these concerns, these businesses also have the added pressure of re-assessing their opted out staff on a specific date. Postponement is not available for employers at re-enrolment, which means that some employees will be re-enrolled part way through a pay period.

This causes headaches for some payroll systems that cannot then cope with pro rata contribution calculations. It is further compounded by AE requiring more data than traditional payroll activities, which has the potential to be a serious headache without the proper preparation.

Failing to prepare means preparing to fail

Employers that do not review their existing records will often end up recording inaccurate, inconsistent or duplicated data, which can then become entrenched in their enrolment and payroll systems. This could cause a range of problems, from mismanaging contributions to the issuing of inappropriate member communications.

In the worst cases it could see employees missing out financially by not being re-enrolled, missing the employer contributions and failing to meet the member outcomes that AE was envisaged to have.

These issues even have the potential to cause financial damage. The Pensions Regulator (TPR) has already announced that it issued 2,248 compliance notices up to the end of Sept 2015 alone for failing to comply with regulations on AE.

Larger employers have had three years to adapt their systems to AE, so schemes that do not reconcile their data may find the TPR’s patience wearing thin. The regulatory body has already stated that it will be auditing employee data and compliance, so it’s important that businesses are well prepared and confident that their records are compliant.

To avoid these risks, it is essential that businesses use re-enrolment as an opportunity to review their HR and payroll systems, and properly reconcile employee data. Employers should conduct annual audits on AE compliance.

These yearly checks can help employers to keep track of opt-outs, contribution reductions and other changes in their workforce that could affect pension eligibility. Schemes using this method can gain peace of mind ahead of re-enrolment that they hold the correct data that complies with TPR regulation.

To make the process of auditing for re-enrolment easier, employers can now benefit from middleware systems that can take responsibility for the entire procedure, managing opt-outs, contributions and regulatory communications. Systems like these can run validation reports to meet TPR requirements, working in conjunction with existing HR and payroll systems.

This can save employers a great deal of work, particularly at a time when other pension issues such as GMP reconciliation are on the agenda, and also help employers to avoid the risk of fines by the TPR.

What is important to remember is that this isn’t just a one off. Re-enrolment is an ongoing procedure that will occur every three years, and businesses must therefore make it an intrinsic aspect of their business operations by streamlining systems and conducting annual checks on their data.

Leaving systems as they are will only cause future problems that are likely to attract the attention of TPR. It’s therefore essential that businesses take the opportunity to review their systems now, so that they can reap the benefits of a less time-consuming enrolment procedure, both now and in the future.

You can also read the full article on the Professional Pensions website.

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