Pension auto-enrolment: a warning from Norway

UK employers should heed the lessons learnt by Norwegian companies when pensions autoenrolment was introduced there in 2006/07, according to consultancy Mercer.

Mercer said that employers should not leave preparations to the last minute and should not think autoenrolment is a one-off exercise. Mercer auto-enrolment relationship manager Rich Tuff said: “One of the unintended consequences of Norway’s legislation was the extreme complexity of the auto-enrolment requirements, and the UK’s regulations will have a similar effect.”

He added: “The main administrative challenge will be to categorise and track employees on a continuous basis, to ‘catch’ them when they became eligible for autoenrolment. Many employers believe auto-enrolment is a one-off exercise, but it’s much more complex than that”.

Auto-enrolment will be introduced in the UK in 2012 and around 5 million employees will be affected. Tuff said that UK companies must categorise their employees into entitled, eligible and non-eligible workers. Each category has different criteria and entitlements to track, so that even the most sophisticated payroll systems will need to be changed in order to map these over time.

“To manage the auto-enrolment process on a continuous basis, companies will need an efficient process for identifying and coordinating data between their various HR, payroll and pension providers. In Norway, we designed a highly successful data management tool and support service for aggregating this data, to make the process smooth and automatic,” said Tuff.

In Norway, companies also found the transfer of data problematic, as there were often no common standards between functions and the systems they used. File formats were a particular issue, with different providers asking for different formats and file types across payroll and other functions.