Technical view: six tips to ensure a smooth and pain-free auto-enrolment

• Keep on top of data: Successful implementation relies on data that are accurate, complete and readily available. Without these features, employers may neglect to identify that an employee is due to be enrolled in a pension scheme, causing compliance breaches and back-tracking. Employers should not wait until staging is approaching to start a data cleanse.

Although the Pensions Regulator has set out record-keeping guidance, in practice employers may be using numerous systems to operate auto-enrolment (payroll, human resources or data hub, to name a few). The employer needs to be certain of how to record and manage the required documentation and identify which systems will retain which data items.

• Start the process as early as possible: We have seen some providers turn down auto-enrolment populations from existing clients – or push up their charges. The later this happens, the fewer the options available to the employer.

In the early stages of the auto-enrolment timetable, providers have been able to provide significant support to employers through the implementation process.

However, as more organisations come to stage, providers will have less scope to assist employers to the same extent. Employers should work closely with existing providers as early as possible, or start a selection process to keep options open.

• Communication matters: Steps taken to prepare employees for the impact of the reform may be the first time some employees, or groups within a workforce, will have received information about a pension scheme.

The government has prescribed statutory requirements and templates for communicating the details of the scheme chosen for auto-enrolment.

However, if improved member engagement and ultimately higher employee saving rates are to be achieved, communications need to go beyond the statutory minimum. Employers should think about what messages they want to put out to their workforce over and above basic requirements and coordinate with their provider to agree shared responsibilities.

• Learn about certification: At first glance, certifying that a scheme meets the quality criteria for auto-enrolment appears to be straightforward. However, each employer needs to prepare its own certificates for each pension scheme offered – or scheme section, if using different certification tiers within a scheme – and is required to prepare lists of employees enrolled in each, particularly where a certificate does not cover all employees being enrolled in a single scheme or section.

Employers should consult the Department for Work and Pensions’ guidance on certification, understand the data requirements, and consider where the required information will be held to ensure it is easily accessible for inspection by the regulator.

• Run a thorough check of existing schemes: Legacy schemes, such as inherited individual personal pensions or small group personal pensions, are coming to light as a result of auto-enrolment. If an employer intends for these arrangements to qualify for auto-enrolment then each scheme needs to meet the minimum contribution requirements. Conducting a thorough audit of all existing pension schemes should be a priority for employers. This may also be an opportunity to consolidate.

• Ensure current procedures are suitable: Existing HR practices are very likely to need significant change in order to comply with the legal requirements. For example, organisations with no central HR function sometimes have recruitment practices whereby a new hire’s data might not be included in payroll or employee databases for several weeks.

This system would struggle to meet auto-enrolment timescales – such as the issue of a postponement or enrolment notice within a month of joining. It is important for employers to analyse existing HR processes and factor in time to introduce any changes. Providing training or incentives to achieve the correct behaviour should support the transition.

Rachel Brougham is head of auto-enrolment and Jim Doran is a retirement principal at Mercer