Auto Enrolment Presentation for BID Clifton

• Auto enrolment started to be phased in from 1 October 2012 • Start date known as the staging date for individual employers depends on number of employees at 1 April 2012 and PAYE refer

Pension Reform - Auto Enrolment

FINANCIAL MANAGEMENT

ANDERSON

Who are Anderson Financial Management?

• We are a Clifton based Financial Adviser with many years

experience in advising clients of all walks of life and in many

financial areas

• A large number of our clients are company owners, and

entrepreneurs, Directors and Partners seeking financial assistance in the corporate arena We also offer a facility for offering financial advice to employees

• We pride ourselves on providing consistent, transparent advice and

on building ongoing relationships with our clients

• We believe that all clients are unique, and therefore require a

distinct tailored financial plan

Workplace Pension Reform

• The Government wishes to promote personal responsibility for

• Auto enrolment started to be phased in from 1 October 2012

• Start date (known as the staging date) for individual

employers depends on number of employees at 1 April 2012 and PAYE reference

• Employers with several PAYE references start from the

earliest reference date

• Minimum contribution rates phased in over a six and a half year period commencing October 2012

Staging datesNumber of employees on 1 April 2012

•Fewer than 30* 01/06/15 to 01/04/17

Insert your PAYE reference into The Pension Regulator’s tool to

find your actual staging date

* These are determined by the last two characters of the employer’s PAYE reference starting in

June 2015 and continuing to 1 April 2017 New employers post 1 April 2012 begin from 1 May 2017.

Auto Enrolment - the basics

• All employers must automatically assess and enrol eligible workers into a ‘Qualifying Scheme’

• It can include business owners employing their spouse

• Employers will be able to certify that their current Defined

Contribution scheme meets the required contribution levels,

however…

This scheme may only be used for new members if the auto

enrolment requirements are met

• Where no QS already exists, or it will not allow auto enrolment, the employer must set up an alternative for auto enrolment

Who are workers?

Who has to be Auto Enrolled?

• Workers aged 22 to State Pension Age and

• Working or ordinarily working in the UK and

• Earning more than the ‘earnings trigger’ for automatic enrolment in their pay reference period, and

– A pay reference period may be weekly, monthly, annually or any

Summary of categories of workers

Over ‘earnings trigger’

for automatic enrolment

(£10,000) Non eligiblejobholder jobholderEligible Non eligible jobholder

Between £5,824 and

Under lower earnings

threshold (£5,824) Entitled worker

When must a worker be Auto Enrolled?

• Default: Must be auto enrolled into a QS within six weeks of the later of:

– the employer’s staging date

– date of joining the employer

– attainment of age 22

– exceeding the ‘earnings trigger’

• An employer can use postponement (a waiting period of up to three months) rather than the default six weeks before an employee needs

to be auto enrolled

Qualifying Scheme

• Could use an existing scheme providing it:

• Meets ‘qualifying criteria’

– Registered Pension Scheme (either occupational or personal)

• Meets ‘minimum requirements’

– DC: Minimum contributions

• If not, can increase contributions/change definition of pensionable pay

• If the scheme is a Personal Pension then a legal agreement between the

employer, to pay the minimum contributions, and the provider must be in

place

• Meets ‘maximum charges cap of 0.75% pa on the default investment fund

• Can use salary sacrifice

Auto Enrolment Pension Scheme

• Qualifying Schemes (continued)

• Must also meet ‘auto enrolment’ criteria

– Requirement for no choice

• i.e default investment fund – No requirement for member to provide information

• i.e no requirement to complete application form– No barriers to entry

• i.e method of paying contributions such as salary sacrifice

Alternative Qualifying Schemes

• Contributions must meet the statutory minimum percentage of

banded earnings £5,824 up to £43,000 (2016/17)

• This is the most common definition of earnings, and usually the

most cost effective and is known as ‘Qualifying Earnings’

• Contributions using ‘Qualifying Earnings’ are based on actual

earnings (including overtime, bonus, commission, maternity, statutory sick pay)

Alternative Contribution basisThe three alternative sets are set out below;

1= Contribution based on pensionable earnings, or

2 = Contribution based on salary provided basic salary makes up

at least 85% of total earnings for

3 = Contribution based on 100% of total earnings

• The employer has to certify every 18 months that minimum

contributions are met on the alternative basis if Qualifying Earnings

is not used

• Workers automatically enrolled (or who have opted in) may

‘Opt-out’

– Those with Enhanced/Fixed protection

– People who can’t afford to contribute

• An Employer must inform workers of their right to Opt-out and how

to Opt-out

• The employer must not give out or send out ‘Opt-out’ forms:

- requests to ‘Opt-out’ must be handled by the scheme provider

NOTE - an employer cannot advise anyone to opt out

Opting out (cont.)

• A one calendar month Opt-out window starts once the worker is an active member of the pension scheme

• The worker will get a full refund of all contributions.

• You need to have become an active member before you can Opt-out

• After the Opt-out window has closed, the worker may still request to cease membership of the pension scheme (under the scheme rules) but contributions will not be refunded

Summary of employer obligations

Eligible jobholders Non eligible

jobholders

Entitled workers Can ask to join a pension scheme

Communicating to workers

• At staging, employers will need to communicate to all their workers,

(including existing pension scheme members) and subsequently as a worker becomes eligible

• Employers need to inform workers of their rights and whether they are being

automatically enrolled or postponed

• The deadlines for communication are:

– two months after staging; for existing scheme members, or

– within six weeks for all other communications

• Communications must be sent directly to the individual

(eg by letter, email, HR web portal)

• TPR has provided example ‘template’ letters, which may be customised.

Declaration of compliance (registration)

• Employers must complete a declaration of compliance (registration)

• The deadlines are:

– five months after the staging date and

– two months after every re-enrolment date

• Employers may receive a penalty fine if they do not complete their declaration

on time

• Employers will need to provide certain details, for example:

– which pension schemes were used to comply with the duties, and

– the number of eligible jobholders automatically enrolled into each scheme.

• All postponements applied at the staging date must have come to an end before

the declaration can be completed

• You can start the online process early and partially complete your declaration.

The Pension Regulator will have the ability to impose penalty notices

if an employer does not comply with their new duties:

• Fixed penalty of £400 where an employer fails to respond to a

warning notice from The Pension Regulator

• An escalating penalty of £50 to £10,000 a day (depending on the size of the employer) For example if the employer fails to pay

contributions on time

• Fixed penalty of £1,000 to £5,000 for prohibited recruitment

conduct, for example where an employer screens job applicants for their intention to join the pension scheme

Things for an Employer to consider

• What is your staging date?

• Can you use an existing scheme (check if it qualifies with scheme provider)?

• Most well known providers who do not specialise in Auto

Enrolment will not take on AE responsibilities for new joiners

• Can you amend an existing scheme to meet qualifying criteria?

• Set up a new scheme which meets the qualifying criteria;

• Use NEST/ The People’s Pension/NOW: Pensions – for some or all

of your employees

• Offer a combination of options for different areas of the workforce

Where can I obtain more information?The Pension Regulator (including staging dates)

Visit www.thepensionregulator.gov.uk/pensions-reform

Call: 0845 020 0090

DWP

Visit reforms/toolkit

www.dwp.gov.uk/policy/pensions-reform/workplace-pension-How can we help?

• Take the strain away with regard to the Auto Enrolment obligations

• Create a cost effective Auto Enrolment solution for companies

• Offer employees ongoing meetings, retirement projections and financial education seminars

• Assist local companies with general guidance surrounding their Auto Enrolment duties and employee benefits at no cost

• Provide companies with ongoing support as well as guidance to changes in

legislation

• For further information please contact;

Simon Stygall (DIP PFS)

Financial Planner at Anderson Financial Management

07715302561 or andersonfinancial@sjpp.co.uk

• http://www.andersonfinancial.co.uk/

Next Steps

• Know when you need to act

• Start the planning process

• Arrange an appointment to discuss your circumstances further

Any questions?