Capital Capture managing director Mark Kirpalani explains how digitisation can help pension funds cope with increased administration following the recent reform
This October's pension reform changes will ultimately see the majority of the UK workforce aged 22 or over automatically enrolled into a workplace pension scheme by their employers. By 2017, when automatic enrolment is rolled out fully to all employers across the country, as many as 9m workers are expected to be newly saving, or saving more, for their retirement, with employers obliged to top-up employees' pension contributions.
The practicalities of facilitating auto-enrolment are likely to cause anxiety for lots of employers. While their responsibilities are relatively straightforward, many firms lack the dedicated HR functions to take responsibility for delivering the changes and may feel they will need to employ extra staff to deal with the increased volumes of paperwork.
From an administration perspective, digitisation can play an important role in helping to facilitate a widespread rollout of pensions plans because it can help administrators create the efficient processes needed to run a successful scheme. Specifically, the functionality contained in an electronic-document capture system can ease the administration of pension schemes by helping to capture missing data from structured and unstructured records, improving productivity, ensuring compliance and enabling pension firms to meet evolving data record requirements.
The need for accuracy
Accurate member record-keeping is without a doubt the most vital part of pension management. In addition to non-compliance with guidance on best-practice data management stipulated by the Pensions Regulator, it can be extremely expensive to correct inaccuracies in pension schemes.
A scheme that relies on poor data runs the risk that its liabilities will be underestimated. As a result, its financial planning and payout expectations may be inaccurate, which could lead to customer complaints and reputational damage.
Inaccurate records can also make it harder to transfer pension schemes to a different provider, deal with buyouts or wind up schemes. And when a third-party administrator is used, there is a risk of higher charges to manage poor data.
Electronic document capture and management systems have an important role to play in helping users to extract relevant data more easily. Specifically, a tailored solution can enable the pensions administrator to ensure data is accurate, while document classification enables the measurable data to be quickly identified and instantly passed to the right business stream or workflow.
Rather than allowing input errors to continue unchanged, the fact the technology captures data as soon as it enters the business means errors can be instantly flagged-up through data cleansing. As a result, any mistakes can be identified and resolved as quickly and cost -effectively as possible.
Best-practice data management
The use of digitisation in the pensions process also makes it easier to measure data, while the fact that it is all stored in one central location means it can be easily searched, accessed and updated where necessary. Crucially, this capability can also help to meet guidelines specified by the Pensions Regulator, which says data should be retested at least annually to provide evidence of quality changes.
As well as helping with compliance, electronic capture can contribute to a reduction in storage costs. Archiving documents electronically also has the added advantage of ensuring better security than manual storage, with less risk of loss or damage.
Using document classification alongside an archiving solution will guarantee that the correct retention and disposal policy can be quickly identified and data cleansing can be carried out on existing member records. This important capability ensures compliance, further increasing the level of process automation.
Ready for change
The use of a digital mailroom solution enables documents such as letters and member forms to be instantly delivered to the correct work stream and pension administrator, a far quicker process than waiting for a hard copy to be distributed.
By automating the process, administrators can dedicate their time to performing core business tasks, rather than spending it on the manual storage, retrieval or sharing of member files. In addition, ongoing account updates can be made electronically, resulting in faster responses to pension case enquiries.
In all, as the requirements to implement new company pension schemes or extend existing ones become mandatory, an electronic document capture and management solution can undoubtedly reduce the burden of managing administration under the pensions reform. From an ongoing business perspective, it also brings significant advantages in supporting compliance, ensuring disaster recovery, increasing staff productivity and facilitating the cleansing of historical records.
Mark Kirpalani is managing director at Capital Capture