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Blake Lapthorn and Hays Recruitment - Auto-enrolment seminar - 25 April 2013
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Blake Lapthorn and Hays Recruitment - Auto-enrolment seminar - 25 April 2013

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Blake Lapthorn and Hays Recruitment held a joint seminar focusing on the choices, costs and strategic opportunities of auto enrolment on 25 April 2013 at Blake Lapthorn's Oxford office.

Blake Lapthorn and Hays Recruitment held a joint seminar focusing on the choices, costs and strategic opportunities of auto enrolment on 25 April 2013 at Blake Lapthorn's Oxford office.

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  • 1. Blake Lapthorn and Hays – auto enrolment – helping you plan, prepare and cope with the challenges The what, why, how and when The practicalities and the opportunities 25 April 2013 Seacourt Tower, Oxford
  • 2. Auto enrolment – helping you plan, prepare and cope with the challenges Welcome Housekeeping The book of the film What we will cover today and what we will not cover Participate Challenge Enjoy Adrian Lamb Blake Lapthorn
  • 3. Is auto enrolment -
  • 4. What we will not cover today (because we covered it last time) The basics The employment considerations Communications – the what, when and how The HR issues and challenges What we will cover today What it will cost The challenges for systems The different vehicles The pros and cons and trust and contract based arrangements The strategic opportunity Auto enrolment – helping you plan, prepare and cope with the challenges
  • 5. 8.30 am to 10.30 am Introduction and recap Costs, complications and compliance – Shaun Thompson, Blake Lapthorn The different options and vehicles – Linda Ward, Atkin & Co. The strategic challenge and the opportunity – David Miles and Adrian Lamb, Blake Lapthorn Open forum/Q&A/Summing up Auto enrolment – helping you plan, prepare and cope with the challenges
  • 6. C = Compliance Costs – hard and soft? Complexity Contributions Communications Contractual or statutory? Contract or trust based? Coming soon? Categorisation? Capacity?
  • 7. Who does it apply to? Employers and workers An employer is defined as anyone who has a contract with a ‘worker’. An employer must identify whether they have a ‘worker’ – in some cases this may not be clear. As a minimum, an employer with one or more worker(s) will need to register with The Pensions Regulator. It is important to understand the different categories of worker –and the duties they will have in respect of each category.
  • 8. What does an employer have to do? Automatic enrolment Opting in, joining and contractual enrolment Managing opt outs Providing information and communicate Make/maintain employer contributions Keep records about their workers and the pension scheme Keep track of ages and earnings
  • 9. Jobholders and entitled workers Eligible jobholders – Workers – Aged between 22 and SPA – Earning over income tax personal allowance threshold (currently £9,440 from 6 April 2013) Ineligible jobholders – Workers – Aged between 16 and 22 or SPA and 74 who earn over income tax personal allowance threshold; or – Any age who earn between NI Lower Earnings Limit (£5,668) and income tax personal allowance threshold Entitled worker – Any age with earnings below NI Lower Earnings Limit Know your obligations in relation to each category and watch out re opt outs and opt ins!
  • 10. When and how – the basics? Do you know your staging date? Communicate at the right time to the right person Enrol the right workers at the right time Pay the right contributions at all times
  • 11. What systems do I need for administration? Age + earnings = category
  • 12. Source: Making auto enrolment work, October 2010 Costs to employers can be divided into two distinct elements. First, the contribution to employer of providing the three per cent minimum contribution to employees who remain in pensions saving. These costs represent a transfer to the employee, rather than a pure cost in economic terms. By contrast, administrative cost – for example, the cost of setting up a pension scheme, automatically enrolling employees, calculating and deducting contributions, and registering with The Pensions Regulator – represent a true economic cost. Table 3.6: Administrative costs per person automatically enrolled split by firm size Sample Employer Costs
  • 13. Helping meet auto enrolment obligations Communications to employees Report to The Pensions Regulator Employee Ideal solution • Holds employer specific rules • Determines contributions • Records opt-in/opt-out status • Direct interface with provider(s) • Produces employee communications • Produces MI and audit trail Payroll file Employers Provider A (NEST/People’s?) Provider B (main?)
  • 14. Auto enrolment - communication requirements Prescribed notices must be given to employees within a prescribed deadline Notice to employees already in a qualifying scheme Notices to eligible, non-eligible jobholders and entitled workers Postponement notices
  • 15. Blake Lapthorn and Hays – auto enrolment – helping you plan, prepare and cope with the challenges The what, why, how and when The practicalities and the opportunities 25 April 2013 Seacourt Tower, Oxford
  • 16. Auto enrolment - focusing on the choices, the costs and the strategic opportunity Shaun Thompson Solicitor Pensions Team, Blake Lapthorn shaun.thompson@bllaw.co.uk
  • 17. Auto enrolment – a quick recap of the basics Applies to all UK companies! Workforce is split into eligible and non eligible jobholders and entitled workers Different obligations in relation to each category of worker Eligible jobholders (and non eligible jobholders who choose to opt in) must be enrolled in an “auto enrolment scheme”
  • 18. What is an auto enrolment scheme? Must be a “qualifying scheme” Can be an occupational or personal pension scheme Must not contain barriers to entry
  • 19. Qualifying schemes – overview Employer’s choice (subject to meeting minimum standards) Can be an occupational scheme or personal pension scheme Can use more than one arrangement Opportunity to streamline/harmonise your pension arrangements
  • 20. Using an existing pension scheme Will the scheme provider allow you to use the scheme for auto enrolment? Vital to check and ensure compliance with the minimum quality requirements Accrual rate/contribution rates Access terms – watch out for any waiting period or requirements to provide any information or take steps to become a member!
  • 21. DB schemes Contracted out DB schemes – automatically compliant Contracted in DB schemes – must satisfy the “test scheme standard” Test scheme standard = accrual rate of 1/120th, maximum of 40 years’ pensionable service Employer/actuary must certify compliance Modified requirements in respect of CARE/cash balance schemes
  • 22. DB schemes - transitional period Optional transitional period employers can use – ends on 30 September 2017 Employer can delay auto enrolment for a specific group of jobholders Those jobholders must have been existing employees who were able to join the DB scheme and are still eligible to do so Prescribed notice must be given Employees can opt in! If you close your DB scheme, you must provide another auto enrolment scheme!
  • 23. DC schemes - standard Employer must make minimum contribution of 3% of a jobholder’s qualifying earnings in 12 month period Total contributions must be a minimum of 8% of qualifying earnings Jobholder must make up shortfall (if any) between employer’s contribution (subject to 3% minimum) and 8% Qualifying earnings = gross earnings between £5,668 and £41,450
  • 24. DC schemes – self certification Allows an alternative quality requirement to be used Key advantage is that a different definition of pensionable earnings can be used Tier 1 – 9% (4% employer): pensionable earnings = basic pay Tier 2 – 8% (3% employer): 85% of earnings must be pensionable Tier 3 – 7% (3% employer): 100% of earnings must be pensionable Employer must certify compliance with one of these tiers
  • 25. Contribution rates and phasing in Applies to DC schemes Applicable to both standard DC schemes and self certification DC schemes 1% employer/2% total from staging date until 30 September 2017 2% employer/5% total between 1 October 2017 and 30 September 2018 3% employer/8% total from 1 October 2018
  • 26. Salary sacrifice Can be used for auto enrolment – HMRC has allayed concerns about this An employer cannot require a jobholder to participate in a salary sacrifice arrangement Jobholders can be given the option as to whether to be enrolled on a salary sacrifice basis DC schemes – a jobholder’s post sacrifice salary must be used for purposes of assessing whether minimum contribution rates are met
  • 27. Other options Master trusts – becoming increasingly popular NEST – obliged to take on business
  • 28. Questions?
  • 29. Auto enrolment - focusing on the choices, the costs and the strategic opportunity Shaun Thompson Solicitor Pensions Team, Blake Lapthorn shaun.thompson@bllaw.co.uk
  • 30. Auto enrolment:  choosing a scheme Linda Ward Actuary, Atkin & Co 0121 506 8200  Linda.Ward@atkin.uk.com Linda Ward Actuary, Atkin & Co 0121 506 8200  Linda.Ward@atkin.uk.com
  • 31. Overview ‐ Doing your ‘homework’ ‐ How to choose a scheme ‐ Case studies
  • 32. I is doing my homework OK… Photo from flickr by Apium
  • 33. Background ‘homework’ Age <£5,668 £5,668 to      £9,440 > £9,440 16 to 21 Entitled  worker Non‐eligible  jobholder Non‐eligible  jobholder 22 to SPA Entitled  worker Non‐eligible  jobholder Eligible  jobholder SPA to 74 Entitled  worker Non‐eligible  jobholder Non‐eligible  jobholder Cost modelling Employee Employer Staging date to  September 2017 1% 1% October 2017 to  September 2018 3% 2% From October 2018 4% 3% Minimum contributions
  • 34. Overview ‐ Doing your ‘homework’ ‐ How to choose a scheme ‐ Case studies
  • 35. For auto enrolment, the existing scheme must  meet the requirements of a  ‘Qualifying Scheme’ All employeesAll employees Decision 1:     Use current scheme(s) to auto enrol? Senior  employees Existing  members
  • 36. Decision 2:     To NEST or not to NEST? NEST  is  the  default  auto  enrolment  option  unless  you  notify the Pensions Regulator  otherwise
  • 37. Decision 3:     Trust‐ vs contract‐based?
  • 38. Decision 4:     Choose a provider
  • 39. Overview ‐ Doing your ‘homework’ ‐ How to choose a scheme ‐ Case studies
  • 40. Photo from flickr by myfuture.com
  • 41. Case study 1:     Elderly care charity Background ‘homework’: • 900 employees • Existing generous GPP: 10% employer contribution • 30% take up in current scheme, low charges • Only affordable option for remaining employees is statutory  minimum contribution (3% after staging) Choosing a scheme: • Simplest option: introduce new category to existing scheme,  but provider would increase charges • Alternatives considered: NEST, NOW, The People’s Pension • Final decision: NEST selected for new members only
  • 42. Photo from flickr by Julien Haler
  • 43. Case study 2:     Small packaging manufacturer • 40 employees – staging date 1 August 2015 • Existing occupational scheme (historically DB, now DC for  active accrual), charges met by employer • Contractual enrolment, high take‐up • Employer wants to transfer costs to employees – bringing  forward auto enrolment and looking at new providers • Transfer deferred members too?  Points to trust‐based  option • Issues with contractual enrolment: consultation in progress  that may simplify
  • 44. Overview ‐ Doing your ‘homework’ ‐ How to choose a scheme ‐ Case studies
  • 45. About Atkin & Co Established in 1992, Atkin & Co is a  specialised,  independent  firm  built  on  a  strong  team  of  high  calibre  individuals.  We provide full pension scheme and  consultancy  services  in  a  dynamic,  creative and cost effective way. We  specialise  in  providing  services  to  small  and  medium  schemes  and  employers: we recognise that they usually have similar problems to larger  schemes and employers, but without the same resources to throw at them  and therefore need more innovative and collaborative solutions. Please visit www.atkin.uk.com for more information or call Linda Ward on 0121 506 8200.
  • 46. Auto enrolment:  choosing a scheme Linda Ward Actuary, Atkin & Co 0121 506 8200  Linda.Ward@atkin.uk.com Linda Ward Actuary, Atkin & Co 0121 506 8200  Linda.Ward@atkin.uk.com
  • 47. Auto enrolment – strategic fit David Miles HR consultant, Employment team Blake Lapthorn david.miles2@bllaw.co.uk
  • 48. Is your AE plan coherent? Employer Brand Reward Strategy Talent Management Culture Employees Needs Business Strategy Legal obligations
  • 49. Drivers for Change Attraction and retention of High performers Employees want fair remuneration Cost Control Competitive Advantage Legal obligations
  • 50. Reward strategic fit Employer Brand Learning & development Legal Obligations Talent Management Culture Employees Needs Business Strategy Reward Strategy
  • 51. Reward Strategy Components Salary sacrifice Pensions Merit Pay Non Financial Rewards Performance Pay Bonus Share Schemes Long Term Incentives Basic Pay Reward Strategy
  • 52. Some Thoughts Is it time for a reward strategy? Will AE be a missed opportunity for review of reward? Have you got time & resources for review? Will AE add to your costs? Will you make welcome or unwelcome changes elsewhere to compensate? Do you measure the cost and impact of reward? Will you measure the cost and impact of AE?
  • 53. Auto enrolment – strategic fit David Miles HR consultant, Employment team Blake Lapthorn david.miles2@bllaw.co.uk
  • 54. Auto enrolment – the bigger picture and the strategic opportunity Adrian Lamb Pensions director, Pensions team, Blake Lapthorn adrian.lamb@bllaw.co.uk
  • 55. Some obvious (and not so obvious) questions and comments What does it have to do with a pension? If it has little to do with pensions what does it have to do with? The bare minimum will not be adequate for individuals but what about employers. Is auto enrolment just a precursor to more tax or NI? Is it right for everybody? Lots of choices, lots of work, but limited resources and possibly limited time. Big picture should not be ignored. What would success look like? Auto enrolment – helping you plan, prepare and cope with the challenges
  • 56. The facts and some issues If you are paying less than 3% for all your workers now it could cost you more There is lot of work at the outset and ongoing – time and resources Will scrapping contracting out affect any of this? Whose responsibility is it? What is your room for manoeuvre? Costs may go up more in the future Auto enrolment – helping you plan, prepare and cope with the challenges
  • 57. Auto enrolment Salary sacrifice OK? Beware inducements How will this fit with other benefits and how will it fit with a total reward/flexible benefit approach? “Your total remuneration for the [your role] will be £30000 but – you will have the option to exchange some of this amount for other benefits, including private medical insurance for yourself and your dependants; additional life assurance, extra holiday, etc. – in accordance with our legal obligations we will automatically reduce this amount by 4% and we will automatically enrol you into the [XYZ Group Personal Pension Scheme]. Please note that the Company is also required to pay 3% of your pay from time to time into that scheme and you are able to pay more than 4% but you cannot pay less unless you opt out.” Could flex pricing be seen as an inducement?
  • 58. Why Salary Exchange? 33.9% 17.7% *Assumes net take home pay remains the same, Employer 100% NI reinvested Impact less if Employer retains NI saving
  • 59. To the different stakeholders - to HR - to Finance? Compliance (no fines and no complaints)? A more engaged workforce? Does it depend on where you are coming from? Auto enrolment – helping you plan, prepare and cope with the challenges What would success look like?
  • 60. An open or recently closed DB Scheme? Nothing? Minimal GPP/stakeholder Reasonable DC Segmented workforce – some in closed DB, some in DC, some in nothing Auto enrolment – helping you plan, prepare and cope with the challenges Where are you coming from?
  • 61. Manufacturer/Engineering - recently closed DB (from full open) so costs already there – GPP ranging from 3%/8% to 7%/12% designed – so no extra costs Charity – GPP – with latest influx from DB scheme closed to new entrants some time ago – so GPP up and running – 3%/11% upwards – minimal compliance issues except for initial eligibility – so minimal extra “hard” costs Small charity with nothing at present – up to 3% plus lots of extra work Auto enrolment – helping you plan, prepare and cope with the challenges – some more examples
  • 62. Auto enrolment – the bigger picture and the strategic opportunity Adrian Lamb Pensions director, Pensions team, Blake Lapthorn adrian.lamb@bllaw.co.uk
  • 63. Auto enrolment - making it all fit together HR Systems Payroll Provider
  • 64. Are you an employer/do you have workers? Do you know your workers – eligible, non-eligible and entitled? Do you know your staging date – 1 September 2013 for 1250 to 1999 employees – 1 April 2015 for 50-53 employees – so next 2 years will catch a very large number of workers and employers Do you know your pay cycle(s)? How will you cope with variable earnings for low and high earners? Will there be capacity when you are ready to go? Auto enrolment – helping you plan, prepare and cope with the challenges
  • 65. What about your contracts, terms and conditions, etc? Are you ready for all the communications you will need – there are lots! Who will do all of this work? How will you cope? Do you have a plan? Are you prepared? Have you started? Auto enrolment – helping you plan, prepare and cope with the challenges
  • 66. Start now or soon – probably need at least 12 months Nominate a point of contact Assemble project team Know your staging date Develop a plan Assess your workforce Engage with your suppliers and advisers Auto enrolment – helping you plan, prepare and cope with the challenges Menu/to do list (if you don’t have one already)
  • 67. Automate what you can Review your current arrangements Communicate to ALL your workers Automatically enrol Register Keep records Contribute Consider going early if capacity is an issue? …menu/to do list continued
  • 68. Auto enrolment – helping you plan, prepare and cope with the challenges Menu/to do list (if you don’t have one already) Employer Action Plan Audit Data cleanse Do you meet the quality scheme minimum standards? What is the cost impact? Budget accordingly What do your contracts say? What information can you provide? Do you want to offer advice to employees?
  • 69. Do you want to let your employees know what you are planning? Consultations as appropriate if schemes need updating Communication is key Migrate with salary reviews? What would success look like? …Employer Action Plan continued
  • 70. Feedback Continue discussions over coffee Thank you for coming Auto enrolment – helping you plan, prepare and cope with the challenges