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Aviva: How API technology is changing the SME workplace pensions market

Pensions update for Financial Advisers and Paraplanners

11 Jan 2018

Aviva: How API technology is changing the SME workplace pensions market

Back in 2014 all the talk in the DC pensions market was of a looming “capacity crunch”.  The number of SMEs who needed to set up a new workplace pension scheme to meet their obligations under Automatic Enrolment (AE) from mid 2015 onwards was in the tens of thousands each month. That this predicted crunch never happened is testament to the way workplace pension providers adapted, from mostly paper based propositions, to online journeys that went straight through into their back office systems. 

The technology that is now revolutionising the workplace pensions industry is Application Programming Interfaces (APIs). APIs are a method of communicating between different software platforms.  They make it easier to extract only the relevant underlying data from a system and send it to another system using a secure authenticated token.

Back in 2012, before AE started, payroll and pensions hardly spoke to each other.  However AE is first and foremost a matter for payroll. The assessment of which employees should be in a workplace pension scheme is evidently best done ahead of payroll runs. Most payroll providers have now developed AE modules within their software. Payroll and pensions have since, as a result, had to work a lot closer together.

Most payroll systems will produce CSV files; for the likes of monthly bills and new joiners. Somebody in the business has to export these out of a payroll system and then upload them into the pension provider’s system. This way of working has become the accepted norm although it can be time consuming.  Given advances in technology such processes are increasingly being viewed as both costly and inefficient.

API technology has now allowed payroll and some pension providers to integrate their systems. At the touch of a button in payroll, employee billing and new joiner data can be automatically sent straight through into the pension provider’s systems. The error validation is also done as part of this automated process. The time spent uploading a CSV file is done away with, often reducing admin time for the employer. For businesses offering payroll services to multiple SME’s this can have significant time and cost savings.

When choosing a workplace pension scheme in the future, integration with payroll is likely to quickly become a hygiene factor in the SME market. However, not all workplace pension providers appear to be adapting their systems in this way. Either their systems don't enable them to deploy APIs or the use of this technology in this way isn’t on their radar.

Payroll integration hasn’t until recently been on corporate adviser’s radars either. Traditionally they too haven’t had much to do with payroll. It is though a significant factor which any advisers who are recommending workplace pensions should now be taking into account. This is especially the case if they have accountancy connections’ with payroll bureaux services. Such payroll bureaux will typically have several hundred SME clients all of whom will now have a workplace pension scheme. If that payroll bureau has to upload several hundred CSV files each month then that is a significant cost and time drag on their business. Advisers though can help them save that time  by recommending pension providers who have integrated their systems with their chosen payroll software provider.

However making life easier and cheaper for payroll is only the start for APIs. Being able to see all of this data in one place, as opposed to scheme or system silos, opens up the world of ‘Big Data’ and data analytics to the workplace pension provider. There will be multiple uses of this ‘Big Data’, some no doubt still yet to be thought of.  Real time quotes for corporate products that traditionally are based around an annual renew date are just one example.

Historically, workplace pension providers have tried to segment their portfolio of schemes by industry type or AUM.  However seeing all of their data in one place allows providers to segment their SME clients more by behavioural types instead. Much like Tesco Clubcard holders receive targeted offers on the goods that are of interest to them, workplace benefit providers can work with advisers to promote different products at points in their employer lifecycle when they are most likely to need them.

But what is it that SMEs themselves want when it comes to workplace pensions and business insurances?

Essentially, they want to know that they are compliant and can run their finances effortlessly with the right advisory oversight thereby freeing them up to run their business. Having workplace pensions therefore linking in with their other financial software packages through API technology is not only the future but is already happening now.

Those workplace pension providers who have not invested in deploying API technology for integrating with payroll software, or who do not have a co-ordinated API strategy, won't be part of these exciting technological developments. They are also likely to be left behind by those that have. For corporate adviser’s, starting to think along these lines when selecting pension scheme providers in the SME market is also an imperative.  



Malcolm Goodwin

Head of SME Solutions

Aviva Life

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