All of a sudden a lot of people want to talk to me about industry data standards. For those who need to understand these things, this is an important issue.
If you are an adviser talking directly to employers about automatic enrolment, I wish I could say the alphabet soup that follows should not matter to you – but it probably does.
The idea behind industry standards is if everyone delivers information in a consistent way, it makes it easier for systems to talk to each other. That all makes sense but it is one thing to build a standard and quite another to get people to adopt it.
Take auto-enrolment as an example. If we were really going to get widespread adoption of auto-enrolment standards, these needed to be ready a couple of years before auto-enrolment started to be rolled out. In practice, the fact the regulations, requirements and obligations became clear only a few months before the process started made creating standards before organisations started development impossible.
Origo published its auto-enrolment standards last year although, to date, adoption has been limited. The firm has delivered a standard in difficult circumstances. While in the past I have criticised Origo and I do not agree with everything it does, on this occasion, and others recently, it has served the industry well.
Once firms have started spending millions of pounds building systems, there has to be a very strong argument why they should rebuild them to retrospectively fit industry standards.
Nest has published the format in which it wants information presented to it, as a comma-separated value file.
More recently, a group called Pensions BIB has emerged, essentially comprising three organisations: the British Computer Society, HM Revenue & Customs and the British Application Software Developers Association. These bodies are working together to define a single message that payroll software providers would like pension providers to adopt.
There seems to be an appetite for this among a number of master trusts where their systems are not perhaps as evolved in the recognition of the roles of different intermediaries as they could be.
The Pensions BIB standard will be known as the Pensions & Payroll Data Interchange Standard (Papdis) and it is hoped organisations will start to implement it early next year.
If you are still with me, you are doing well. There appears to be little space for plain English in all this standards stuff.
I can understand that payroll providers would like to be able to supply data with a single message to pension providers but at a time when the pensions minister has just slapped a charge cap on providers, I am struggling to see the business case for those providers to spend money changing their systems to adopt the new standard.
We appear to be in a market with a large surplus of demand over supply so if yours is one of the organisations with the capacity to write auto-enrolment pensions,
you will want a compelling argument for adopting the pensions data standard.
It looks likely that some pension providers will use Origo standards. Others will use the new pensions data standard – which appears capable of interacting with Origo standards – or a mix of both.
So where does this leave us all? Advisers play an important role in helping employers find the auto-enrolment solution that best meets their needs. In this context, the case for supporting adoption of Origo standards when future technology developments make it practical seems well made.
The Papdis organisations probably need to articulate to advisers and pension providers why support for their standards would deliver genuine benefits to employers.
Also, in the long run it would be beneficial commercially for Nest, and consequently its members, to support both the Origo and Papdis standards.
It would be a good way for them to demonstrate they want to support market efficiency rather than operate in splendid isolation.
Ian McKenna is managing director of Finance & Technology Research Centre