North East Scotland Pension Fund has implemented an integrated payroll system to provide a more accurate and timely way of paying out benefits to members.
Such systems are more common among defined benefit schemes and can reduce the chances of payment errors.
The £2.6bn fund began its plan to merge a standalone payroll database with its existing pension administration database in early 2012, according to its 2013 report.
“[With] the system we were using, we had to double key a lot of information. This system provides us with a straight-through payment system, attached to the benefits system,” said Laura Goodchild, pension manager at NESPF.
The system now holds all member data and delivers a 25 per cent reduction in benefit processing time compared with the previous system, according to the report.
This system provides us with a straight-through payment system, attached to the benefits system
The new system is more responsive as any changes in member data flow straight to payroll, Goodchild said.
NESPF merged the existing 18,000 pensioners and dependants from its ceding system into a new payroll database in order to make live payments of £10m monthly from November 2012.
A payroll survey to determine the fund’s requirements revealed two to seven payrolls were needed – which would replicate the scheme set-up in the existing administration system and enable accurate reporting to meet new accounting requirements.
The fund carried out a data-mapping survey in May 2012 and a conversion programme was developed.
During the second stage of the payroll project a test conversion to integrate the database now used to make payments with the existing administration database was carried out.
The full live conversion to the integrated system was completed in January 2013.
Reducing mispayment risk
Having an integrated payroll system can reduce the chances of payment error, according to experts, because data is inputted into one system.
“Each time you transfer data between systems there is the chance for data corruption, either by putting [data] in the wrong address or in the wrong field,” said Tom Smalley, associate at Barnett Waddingham.
An integrated system can also reduce data processing times and efficiency from an IT perspective as those working in the IT department only have to get to grips with one system, Smalley added.
It is more common for DB schemes to have an integrated payroll system than defined contribution schemes, according to Helen Gilchrist, senior DC consultant at Towers Watson.
“Because they’re bigger, they have more of a legacy approach and they tend to have support administrations whereas in modern DC schemes they are bundled up with one provider,” she said.
Within a contract-based DC scheme, payroll may just calculate contributions, while a trust-based scheme is likely to perform more functions in terms of processing refunds, Gilchrist added.
