Understanding the different provider approaches to scheme establishment

Setting up a new pension scheme is a milestone for any employer, large or small. In this insight article we look at the process involved with workplace pension providers when establishing a new scheme.

Setting up a new workplace pension has often historically been a long winded and painful process involving a lot of backwards and forwards between the provider, employer and any adviser.

For many providers, heavy investments in electronic process and regulatory approved digital signature technology have reduced timeframes and the length of the process considerably.

Our data shows that 85% of workplace pension providers now facilitate the establishment of the new scheme electronically. Hargreaves Lansdown and Legal & General are now the only two providers who rely on a manual process alone.

Aviva Designer, Aviva My Money, Aviva My Money Master Trust, Mercer Master Trust Aviva and True Potential all schemes are now established via electronic process. The remaining providers allow the employer to chose between electronic or manual setup.

However, only 42% of providers in our research are able to facilitate members joining a scheme via mobile device.

For many, one of the longest stages of the process in establishing a new workplace pension scheme is populating the system with the required information and member data.

Our analysis shows that all workplace pension providers are able to populate their system with a copy of the employer’s payroll on Microsoft Excel, and also provide a template to assist with this.

Three quarters of providers can also populate the system with an XML file – the providers who cannot are Fidelity, Hargreaves Lansdown and True Potential. All of these files can be uploaded online, and other than True Potential who capture this information for manual input, for all other providers this is back end automated.

Just over half (60%) of providers are able to populate the system via an API. Those who cannot are Fidelity, Hargreaves Lansdown, Mercer Master Trust Scottish Widows, Royal London, Scottish Widows GSIPP, Scottish Widows Master Trust and True Potential. Mercer Master Trust Scottish Widows, Scottish Widows GSIPP and Scottish Widows Master Trust can take HR data but it must be in a prescribed format.

At a time when financial cyber attacks are more prevalent than ever, it is comforting to see that all providers used secure data transfer for these files.

It is likely that during the process of the establishment of a new scheme, many employers and advisers will find they have questions that they need to ask the workplace pension provider. Our data shows that all providers offer electronic and telephone support for both advisers and employers with a dedicated individual contact. All also offer on-site training. Other than Royal London, all have a centralised call centre for dealing with enquiries. Other than Aegon Workplace ARC, all also offer an online support site.

Before sending a scheme live, employers, advisers and workplace pension providers may find some errors occur. However, according to our data only 30% of providers require the employer to setup a test scheme first (hosted in a test environment) before the actual live scheme is established.

The providers who require test schemes are Aegon Master Trust, Scottish Widows, Scottish Widows GSIPP, Scottish Widows Master Trust and True Potential. For Aegon Master Trust and True Potential all data is transferred from the test to the live environment in order to avoid the duplication of input.

During the process of establishing a new scheme there are a lot of documents and communications necessary for employers and the scheme members. It can feel like the employer is buried in paperwork for their scheme members.

Thankfully, our data shows that workplace pension providers help with the paperwork. All workplace pension provider systems will generate all necessary documents and communications and issue them. Half of provider systems will generate and send these electronically, 10% of provider systems will generate these manually, and the remaining 40% will do both.

Overall, our data shows that scheme establishment processes are a lot more slick than they were a decade ago.

However, it is worth noting that some providers make this much easier than others. Hargreaves Lansdown has the most old-fashioned of provider processes. Employers are only able to establish a scheme manually and can only share payroll data on Excel as Hargreaves Lansdown’s system cannot support XML or API.

It is also worth noting that Scottish Widows require the employer/adviser to set up a test scheme first but do not automatically transfer the data which could lead to the duplication of the work necessary to input the data.

Standard Life, Mercer Master Trust Aviva, Aegon Master Trust, and Standard Life DC Master Trust have the widest range of options available when it comes to the process for establishing a scheme.