Pension submission errors hamper auto enrolment success

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New research has revealed error rates of up to 50% in the auto enrolment data submitted to pension providers, resulting in increased costs and administration for employers, payroll firms and pension providers.

Fintech specialist firm pensionsync analysed data representing contributions to over 10,000 schemes and found that data sent on behalf of employers to their pension providers had a 50% error rate.

Common submission errors included:

  • Contribution amounts that are too high or 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

One particular area of pension administration confusion highlighted by the report relates to contribution errors resulting from employers or their agents incorrectly believing a pension scheme operates on a Relief at Source basis rather than Net Pay, and vice versa, and so confusing gross and net figures.

According to the study’s conclusions, such high error rates suggest the need for greater attention to be paid to data accuracy by pension administrators or employers themselves.

Speaking at a House of Lords industry roundtable hosted by pensionsync chair and former pensions minister Ros Altmann, authors of the research emphasised that this does not mean all auto enrolment data contains data that is 50% inaccurate. Altmann also praised the “fantastic success” of the scheme, with opt-out rates far lower than expected.

However, the requirement to correct and resubmit the data adds time to pension administration, resulting in increased costs for employers, payroll bureaus, bookkeepers and pension providers.

Speaking on the issue Altmann said the industry needs to discuss the data issue before they become “another legacy issue” that needed to be dealt with. “We don’t want people to get the message that they can’t trust their pensions,” continued Altmann.

Following the significant issues caused by inaccurate records in legacy systems, many in the industry were hoping for a fresh start with auto enrolment. Unfortunately, a lack of regulatory checks, common standards around data and inaccurate record keeping have led to the current state of pensions data.

Neil Esslemont, head of industry liaison at The Pensions Regulator stated that the watchdog’s “top priority” is to have data improvement plans to check on legacy data and how it is being corrected.

However, as flagged by the research, the current regulations only require the regulator to check employers are paying into a scheme - not the accuracy of information.

The CIPP surveyed their members on auto enrolment, and flagged several major issues. These included the fact there was nowhere to go for clear advice on the scheme, too much choice in the industry and no standardisation of terminology.

At the roundtable, payroll and pensions experts admitted that there were no “silver bullets” for fixing the issue. One suggestion was for pension providers to capture salary data to ensure the right contributions are being paid, while another was for the industry to form a working group to agree a set of standardised terms all providers could work to.

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14th Sep 2018 09:39

Did it also highlight things such as NEST reporting employers to TPR for making a NIL payment late?

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By k743snx
14th Sep 2018 10:28

"payroll and pensions experts admitted that there were no “silver bullets" for fixing the issue".

Give them and all the associated bureaucrats the Golden Bullet and scrap the whole thing

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14th Sep 2018 11:05

I wonder how many errors are at the hands of employers who decided that they didn't need to pay a pesky IFA because AE is so simple and straightforward...

I bet its a large percentage...

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14th Sep 2018 11:05

Not surprised - if 50% of pension data is wrong imagine how smoothly MTD will go.

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14th Sep 2018 12:05

Well a 50% error rate certainly sounds very high. But does this mean 50% of the data is incorrect (which of course would be terrible) or that 50% of the schemes have made one or more errors over the course of 3 years, which is probably to be expected given the number of returns and employees involved?

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14th Sep 2018 12:18

"One particular area of pension administration confusion highlighted by the report relates to contribution errors resulting from employers or their agents incorrectly believing a pension scheme operates on a Relief at Source basis rather than Net Pay, and vice versa, and so confusing gross and net figures."

You don't say! This terminology to differentiate between these two schemes was an accident waiting to happen.

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By Mallock
14th Sep 2018 12:50

Most of the problems have arisen because there are too many options. It should have been simple - everyone pays gross, the amount is a percentage of gross pay (without all the options of it being a percentage of NI able pay or pay without bonuses etc) and everyone is in whether they like it or not.

What we have are some providers only accepting gross payments, some will take either, most employers don't understand anyway and no-one wants to pay for help.

This could all be a massive scandal when the treatment of contributions by some providers is looked into. We are aware of 3 employers where the wrong direct debits have been taken (no correlation to the correct pension submissions), staff members inquiring and being told there are no contributions received for them (when there are) and no one in the provider able to produce details of the funds and contributions for individual employees. It's all being sorted apparently!

Once people have moved job a few times and switched schemes it might be too much of a mess to sort out.

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By Dandan
14th Sep 2018 13:04

I imagine that the biggest error is probably that more that 50% of the employees don't really know that it is not mandatory to contribute.

The govt advertising campaign presented it like it was a mandatory change coming into force. Words were chosen carefully and I never heard the words : "employees can choose to join". By the time auto-enrolment started, very few bothered to read the pack .

In any case S will hit the F when the time comes to collect your "savings ".

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17th Sep 2018 09:07

I dont care how good software providers are, it all comes down to trial and error.

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17th Sep 2018 09:16

.....errors resulting from employers or their agents incorrectly believing a pension scheme operates on a Relief at Source basis rather than Net Pay, and vice versa, and so confusing gross and net figures.......

Can someone translate this into Geordie/ English for me...I don't quite get it?

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17th Sep 2018 11:58

It's just disappointing that we have pension black holes and this does not exactly make it look all great and well now, does it?

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