Written evidence submitted by VocaLink |
1.1 VocaLink is pleased to make a short submission
on the government's planned pensions reforms. This submission
focuses on an aspect of the government's proposals in which VocaLink
has particular and highly relevant expertise.
1.2 Having pioneered electronic payments for
over four decades, many of the world's top banks and their customers,
including the UK Government, rely on VocaLink to meet their transaction
needs. Our platforms process over 90 million transactions on a
peak day, including 98% of benefit payments, and connect the world's
busiest ATM network of over 60,000 ATMs.
1.3 We provide the central infrastructure for
Bacs and the UK Faster Payments service and process payments throughout
the Single Euro Payments Area (SEPA). Our services operate on
'never fail' technology which ensures total reliability and availability,
24 hours a day.
1.4 VocaLink would like to respond to the third
of the areas identified in the Committee's Call for Evidence:
the plans for auto-enrolment into work-place pension schemes and
the establishment of the National Employment Savings Trust (NEST).
2.1 Following the review of personal account
pensions and auto-enrolment initiated by the new government and
published on 27 October 2010, DWP took the decision to proceed
with auto-enrolment and with NEST as the mechanism to deliver
this. The review team appeared to share some of business's concerns
about the practicability of the proposed timetable for introducing
auto-enrolment but nevertheless accepted that the programme should
continue broadly as agreed. It is difficult to make a judgment
on whether the timetable will be met until NEST publishes further
details of the administrative arrangements, expected shortly.
Nevertheless, it would be prudent to look at ways of simplifying
the process for introducing NEST as far as possible. This is especially
so given the review's recommendation not to exclude micro employers.
A disproportionate amount of regulatory and compliance time is
likely to be spent in ensuring that micro employers do administer
the scheme appropriately, so time saved elsewhere will be at a
2.2 Throughout the lifetime of NEST and its predecessor
PADA, VocaLink has maintained that the administration of the personal
account pension scheme should be designed so as to:
the compliance costs and administrative burdens on business as
low as possible.
the cost to the taxpayer at a time of severe public expenditure
restraint as low as possible.
all employees receive maximum value, as a result of their pension
contributions being paid into their personal account at the same
time as they receive their salary.
simple to implement, ensuring that the start date of 2012 can
be met, and the maximum number of employers can be introduced
to the scheme as quickly as possible.
VocaLink believes that the existing UK payments infrastructure,
administered by Bacs and operated by VocaLink, provides a unique
opportunity to link employers to Personal Account Pensions in
a low cost, low risk way, with the minimum of compliance
demands on business.
This is because Bacs is already the means by which
more than 95% of salaries in the UK are paid. Bacs has been operating
for over 40 years and currently handles over 90m transactions
on a peak day. Moreover, more than 80,000 organisations are already
direct participants in Bacs ie they are registered to make automated
credit transfers (including salaries and pensions) and/or to collect
Direct Debits. Many more companies are indirect participants in
Bacs through banks, payroll bureaux or accountancy firms. All
together, VocaLink estimates that more than 90% of UK companies
already participate in Bacs. In addition, almost all UK bank accounts
can be accessed via Bacs.
Bacs also comprises messaging services, which enables
information and instructions about changes to accounts or payment
details to be transmitted by UK companies into new schemes such
as Personal Accounts.
Bacs Direct Debit and Direct Credits could meet the
requirements for collecting contributions to Personal Accounts
without any modification whilst the messaging service and supporting
software would only require minimal modification.
Finally, now that the government has announced its
intention of basing PAYE on Real-Time Information (RTI), potential
synergies can be explored between employers' obligations to provide
real-time PAYE information through the infrastructure that supports
the Bacs system and their duty to provide an auto-enrolled pension
account to employees. This would align the collection of information
from employers for NEST with the collection of accurate real-time
information on earnings (RTI) for HMRC and DWP.
VocaLink strongly supports the government's intention
of ensuring that those on modest incomes who may traditionally
not have saved for a pension should be enabled to do so. VocaLink
also believes that in order to reduce administrative complexity
and costs, for both government and employers, DWP and NEST should
look carefully at reusing existing infrastructure rather than
reinventing the wheel. In particular, the option of employers
making use of the Bacs infrastructure, which is already used for
the vast majority of salary payments and will shortly be used
to collect real-time PAYE information, should be carefully considered.