One of the many challenges faced by any Pension Payroll Provider is data exchange with the Pension Scheme Administrator.
If the Pension Scheme Administrator does not use technology that is integrated with the Pension Payroll system, then this introduces a requirement to manually reconcile the pension membership, the payment amounts and other key data items,
such as personal details. Critical time is lost in the process and there is an increased risk of delays and errors, which could ultimately lead to pensioners being under or overpaid, not to mention the additional costs and damage that this creates for members, pensioners and the organisation.
Whether the functions are carried out within the same or separate organisations, developing the correct technology solution for pension payroll data and payment process enables significantly faster and more reliable processing between the Pension Scheme Administration, the Pension Payroll and HR departments. The right structural design also provides the capability to develop tighter controls and integration with enterprise solutions and business services, which in turn enables secure and scalable pensioner self-service and straight through processing solutions, for key tasks such as change of address and personal details. Integration of payroll and administration will become increasingly important as the trend to multiple buy-in contracts for DB schemes creates more complex pension payment sources. So, what are the main benefits of integration?
Visibility and traceability
Do not underestimate this benefit. To have one single record for the entire member journey, from joining the Scheme through to death, available to all administrators is invaluable. It would mean that you have a complete audit trail of all changes and processes throughout the lifecycle and would lead to better management information being available in a faster and more consistent format.
Automation will mean less manual interference and will naturally lead to lower administration and payroll costs.
Risk mitigation and operational efficiency
Mismatching of data in associated but not integrated systems creates a significant operational risk, which trustees and providers ought to pay attention to. Integrated administration and payroll can reduce this risk as data is from a single source and in a single format. There is no data exchange development, no interface processing, no manual reconciliation exercises and most importantly no manual spreadsheets!
Member communications from a single data source also removes the possibility of differing or confusing messages being issued; you can go further by standardising both the style and format of communications to help improve engagement levels. With an integrated solution, there will be no movement of data between supplier systems, so you will be able to seamlessly link it with your online benefit portals. In addition, there will be no manual data input from forms being passed between teams; an area where human errors can easily be made. The time delay of data updates between the pension scheme administration system and pension payroll systems would also be eradicated.
In terms of data validation and cleansing exercises, these are also simplified with no need to compare results between systems and annual audit costs could potentially be reduced as auditors will only need to audit one system.
Inevitably, there will be times when late changes to the Pension Payroll calculations will be required, so an automated system will help speed this up and in addition, process focused security ensures that key data cannot be amended during payment processing. Further to this, pay may be calculated directly from pension benefit sources rather than total pension and trivial commutations can be paid as a part of the pensioner payroll, reducing the need for single payments to be raised.
Members approaching retirement who decide to take a scheme pension would automatically be added to the pension payroll and could be paid on or before the next payroll run. Members can also be suspended from payment (within clear deadlines) instantly by the first team to be notified of a member’s death, reducing the number of returned payments or overpayments.
Improved member experience
Combine these benefits together and you should be left with a well-run payroll system with improved member experiences, consistent communications and a single point of reference for member enquiries.
When considering developments to payroll systems, flexibility to support swift implementation of changes in legislative requirements for the pension scheme administration or pension payroll in a single technology solution is key. Integrated Payroll systems should cater for all scheme requirements, without the need for bespoke programming and manual interventions.