Pensionsync reveals the problems with auto-enrolment data

Last week I was delighted to be invited to a round table debate at the House of Lords covering auto-enrolment data accuracy.

Whilst auto-enrolment’s objective of securing a pension scheme for every worker is going from strength to strength, encouraging employees to save towards a better retirement, Pensionsync have revealed that all may not be going as well at it seems behind the headlines (1).

Following analysis of data representing contributions to over 10,000 schemes (1), Pensionsync’s latest research shows:

  • Data sent on behalf of employers to pension providers have a 50% error rate
  • Legacy pensions are plagued by errors from past manual records
  • And yet, current regulatory checks do not verify data accuracy

Significant data errors

Some of the most common data errors noted include:

  • contribution amounts that are too high or too low
  • contributions made for workers who do not belong to the scheme or have opted out
  • wrong pension scheme identifiers
  • inaccurate postcodes
  • incorrect pay period dates

Pensionsync has also found further evidence of pension administration issues relating to contribution errors – often because employers or their agents incorrectly believe a pension scheme operates on a Relief at Source basis rather than Net Pay, and vice versa, thereby confusing gross and net figures (1).

Such high error rates suggest the need for greater attention to be paid to data accuracy by pension administrators and employers/agents (1).

Inaccurate pension contribution records

Given the complexity of pension rules and calculations, it is near impossible for the majority of workers to understand independently if their pension contribution payments are correct (1). As such, the natural expectation is that employers or pension providers will complete their due diligence to ensure the amounts being paid are being recorded accurately (1). Yet Pensionsync have found this was not the case previously, particularly with contracted out pensions. And the problem doesn’t stop there – this issue still persists for new pension schemes (1).

Repeating problems for legacy pensions

Even most recently many pensioners have had to repay some of their pensions and face cuts, as they are told that past errors in their pension entitlements have been discovered decades later (1). Pensionsync note that ‘the data errors in the pension data were often the result of manual record-keeping, prone to human error, and a failure to ensure robust data reconciliation was regularly carried out – meaning errors continued over time without anyone knowing’ (1).

Regulatory failures

Pensionsync also cite insufficient regulatory checks adding to potential data problems. In failing to ensure data in new auto-enrolment pensions and in legacy schemes is regularly and thoroughly checked, they think The Pensions Regulator and Government could do more (1). ‘The auto-enrolment Declaration of Compliance does not require a confirmation that the pension contributions and employee pension records have been robustly verified as accurate’ noted the team (1). They continued that ‘there seems to be no checking of member data accuracy by most providers. Indeed, many providers could not even check whether contributions are correct if they wanted to, because they do not collect the relevant information on employee pay’ (1).

Technology might be the silver bullet

But the future for pension data accuracy and record management could be a lot brighter. Organisations that use Pensionsync saw their error rates reduce down to 3%, and further still, those who use Pensionsync’s digital integration service between payroll and pension provider software, (removing the need for manual uploading onto spreadsheets), has even shown to reduce error rates to almost zero (1).

It will never be possible to ensure 100% accuracy, but having automation processes in place to thoroughly check and highlight errors that can then be corrected promptly, will bring pensions administration into the 21st century – offering greater reliability, security and lower costs (1).

My thoughts

9 million people have trusted us, that’s employers, agents and the pensions industry, with ensuring that their hard-earned money is passed quickly and in full to the workplace pension we’ve chosen for them. So, as well as assuming that we have done the due diligence in selecting the right scheme for them and their colleagues, they quite rightly believe that we are deducting the correct amounts and ensuring the tax relief is correctly applied where it’s available. We must take that responsibility seriously if we don’t want to undermine a new-found belief in the value of pension membership that was hard to rebuild after the pension scandals of recent decades. I hope that the round table last week was the first of many, bringing together the payroll and pensions industry to build on the success of auto enrolment, rather than being complacent that the work is complete.

Sources

Pensionsync press release

For more information on Pensionsync, visit: https://www.pensionsync.com/