A debate over auto-enrolment for nannies has highlighted the predicament for employees who move through a multitude of jobs. Henry Tapper discusses pensions and the payroll lottery
The debate on auto-enrolling nannies into workplace pensions has been called ‘nannygate’. The FT have quoted Anne-Marie O’Leary of Netmums as saying nannies and their bosses are in “a state of near panic” at the prospect of enrolling.
Nannygate has even drawn a letter to The Times from Ros Altmann, the new pensions minister, making it clear the lady’s not for turning: nannies will not escape auto-enrolment.
So what’s all the fuss about? Firstly, the challenge from Netmums is likely the first of many. The pensions minister’s clearly wanting to be tough from the start. Secondly, the particular circumstances of nannying as an employment highlight the predicament for employees who move through a variety of jobs.
Pot follows… nanny?
Nannies tend to change jobs once every five years and typically look after children from up to ten families in a career. From now on, nannies will become eligible for contributions to workplace pensions set up by their bosses – the parents. So nannies can expect to build up around ten pots.
Expensive and clumsy to manage, we are facing an explosion in the number of pension pots in the UK. Some pension experts see this as an opportunity to test the government’s resolve to introduce ‘pot follows member’.
If the DWP wants pots to follow members then why not start with nannies, who are, by the nature of their work, job-hoppers. Why not encourage the nanny to ask the new boss to set up your old pension as their workplace scheme?
The payroll lottery
Sadly, it’s not as simple as that. You might be in NEST with boss #1, but boss #2 might be powerless to help you. Payroll #2 might refuse to interact with NEST.
If you talk to payroll (and we do) you’ll find that each payroll software provider and each user of that software has sweet and sour relations with pension providers and there are payrolls who refuse to support payments to certain providers.
This state of affairs is made worse when a payroll software provider or bureau strikes a deal with one provider to be its default.
So whether you can get your new employer to support your existing workplace pension could come down to what payroll support they are getting. Choosing a pension could become a payroll lottery.
The wizards of Oz
In Australia your pension follows you around and that works because of hubs like Super Choice, which take contributions from an employer and clear them to a variety of ‘super schemes’.
We had the chance to replicate this before auto-enrolment started but the idea never got off the ground. It’s a shame.
What about PAPDIS?
It should be possible for our payrolls to use a common interface with all providers. This exists and is known as PAPDIS.
But for PAPDIS to work, there needs to be a way of mapping the data on the PAPDIS file into the provider’s record keeping systems so that the right money goes to the right nanny account at the right time. Work is underway to make this happen – this is the plumbing being done by Pensionsync and others so that PAPDIS can be adopted by all providers.
But this is not the end of the problem. Many parents will employ first-time nannies – those without a pension or a clue what pension they want. Nannies needn’t worry; under auto-enrolment it is the boss who needs to choose. But what if the boss has no more of a clue than the nanny?
Parents will need a way to choose a pension which is right for their nanny, for them and for their payroll. That’s not as easy as just listening to what payroll wants. Nannies have every right to a pension scheme chosen for their benefit – after all, it’s their retirement. Employers will not want to get caught up in conversations between moaning payrolls and moaning nannies; they need guidance on what works for everyone.
The technology to help make these informed choices is not widely available (yet) – it needs to be easy to access and at minimal cost to such employers.
