Auto-Enrolment Road Show: Wirral
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Auto-Enrolment Road Show: Wirral

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Auto-Enrolment Road Show, Wirral, Wednesday 26th February 2014

Auto-Enrolment Road Show, Wirral, Wednesday 26th February 2014

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  • Now we’ll take a quick look at the basic facts about automatic enrolment and the employer duties. All of the information is based on our current understanding of the relevant legislation and regulations (including drafts) and may be subject to change.
  • This new legislation means that from October 2012, any UK employer who employs at least one person must register with The Pensions Regulator (TPR) and provide details of their workforce and any pension scheme which they’ll use to satisfy the employer duties. We’ll refer to The Pensions Regulator as TPR throughout the rest of this presentation.They’ll also need to automatically enrol some workers into the scheme and arrange membership of a pension scheme for others.
  • The employer duties will be introduced in stages from October 2012. The date your employer duties will first apply is known as your staging date and it’s based on the number of people in the your largest PAYE scheme on 1 April 2012.TPR will tell you when your staging date is twelve months before your staging date (18 months for larger employers) and send a reminder three months before your staging date.You can choose to bring your staging date forward to coincide with other key company dates such as your end of year accounting. There’s a list of available dates provided by TPR.
  • You’ll have separate duties for three different types of worker:eligible jobholdersnon-eligible jobholdersand entitled workers
  • The different categories of worker are determined by their age and how much they earn. Workers earning £5,668 or less, who are aged 16 – 74 are classed as entitled workers. Workers earning over £5,668 and up to £9,440, who are aged 16 – 74 are classed as non-eligible jobholders. Workers earning above £9,440, who are aged: 16 – 21 are classed as non-eligible jobholders. 22 - State pension age are classed as eligible jobholders. State pension age – 74 are classed as non-eligible jobholders.These figures are for the 2012/14 tax year.
  • For eligible jobholders, you must:- Provide certain information to the pension scheme and eligible jobholder- Automatically enrol them into an automatic enrolment scheme- Deduct any jobholder contributions from salary and make contributions on their behalf- Process any opt-out notices and refund contributions paid
  • You must also:- Roughly every three years re-enrol those who have previously opted out, stopped making contributions or ceased membership more than 12 months before each re-enrolment date.- Keep records of the automatic enrolment and opting out processes and provide to TPR if requested.If the eligible jobholder is already in a qualifying pension scheme, you must provide certain information within two months
  • For non-eligible jobholders you must:- Provide certain information to the non-eligible jobholder including their right to opt in to an automatic enrolment scheme- Arrange pension scheme membership- Deduct any jobholder contributions from salary and make contributions on their behalf- Process any opt-out notices and refund contributions paid
  • You must also:Re-assess worker type roughly every three years and re-enrol those who have previously opted out, stopped making contributions or ceased membership more than 12 months before each re-enrolment dateContinue to assess the non-eligible jobholder in case they change category depending on age and earnings
  • Keep records of the enrolment, opting in and opting out processes and provide to TPR if requestedIf the non-eligible jobholder is already in a qualifying pension scheme, you must provide certain information within two months
  • For entitled workers, you must:- Provide certain information about their right to join a pension scheme- Arrange pension scheme membership. The scheme doesn’t have to be an automatic enrolment scheme- Deduct contributions from their salary and pay these into the scheme. You are not required to make contributions although you can choose to do so.
  • You must also:- Continue to assess the non-eligible jobholder in case they change category depending on age and earnings- Keep records of the joining process and provide to TPR if requestedIf the entitled worker is already in a pension scheme run by you, you don’t have to provide them with any information
  • An automatic enrolment scheme must meet three sets of criteria – the automatic enrolment criteria, the qualifying criteria and the quality requirements. Automatic enrolment criteria To meet the automatic enrolment criteria, a UK scheme must: be a qualifying scheme – we’ll describe what this means in a moment it must not prevent the employer from automatically enrolling, opting in or re-enrolling a worker and it must not require a worker to provide information or make a choice in order to remain a member of the scheme. Qualifying criteriaTo meet the qualifying criteria, the scheme must: meet the quality requirements it must be an occupational, personal or stakeholder pension scheme and it must be tax registered.Quality requirementsThe quality requirements for personal stakeholder/pension schemes are: there must be an agreement between the scheme provider and the employer that the employer must make contributions of at least 3% of qualifying earnings in respect of the jobholder there must also be an agreement in place between the scheme provider and the jobholder where the jobholder can be required to make up any difference to 8% of qualifying earnings all the benefits payable must be ‘money purchase’ benefits and the employer must be able to deduct any jobholder contributions from net pay.
  • The minimum level required to meet the contribution quality requirement is based on what’s known as qualifying earnings. Qualifying earnings are a band of earnings of more than £5,668 and £41,450 or less. These are the figures for 2013/14 and are expected to change each year.Qualifying earnings includes:SalaryWagesOvertimeBonusesCommissionStatutory sick payStatutory maternity payOrdinary/additional statutory paternity payStatutory adoption pay.Source: The Automatic Enrolment (Earnings Trigger and Qualifying Earnings Band) Order 2012.
  • The minimum contribution levels will be phased in over six years from October 2012 (Source: Draft Regulations: - The Employers’ Duties  (Implementation) (Amendment) Regulations 2012 ). This table shows the minimum contributions payable by you and the worker from October 2012 up to October 2018.However you can choose contributions higher than the minimums.
  • As an alternative to using the qualifying earnings definition, you can choose to use certification. This means that you can base your contributions on the scheme’s definition of pensionable salary and contributions will be based on the first pound of pensionable salary. The certificate can cover all workers or groups of workers in your scheme.Again, the minimum contribution levels can be phased in over six years from October 2012.
  • The new employer duties are not optional. TPR will be responsible for ensuring that you comply with your employer duties. Their approach will be to educate and encourage compliance however, you would face substantial fines and even imprisonment if you fail to comply.There are three stages TPR will follow if employers fail to comply with their duties and these are detailed next.
  • Secondly, if you induce workers not to join or to opt out of a pension scheme, you’ll be subject to the three stage compliance process.
  • ‘NEST’ is merely a pension scheme that it being set up by the Personal Accounts Delivery Authority to ensure employers can comply with their duties where a suitable QWP/QQWP cannot be found on the market.Although much of the detail has yet to be confirmed, the various consultations can give us a reasonable idea of what the NEST scheme will look like.The NEST scheme will be similar to any other trust based occupational money purchase scheme in the UK but will have its own specific rules. It will be run by a Trustee Corporation. Employer and Employee panels will set up to represent the interests of these key stakeholders. It is not a state run pension scheme like S2P – it will be run by private companies and specifically not Government. Max contribution – set at £3,600 at the moment, subject to review – the review group recommends this should be removed in 2017.The Scheme will be able to accept ‘Cash Transfer Sums’. These are not ‘normal’ transfer values but are transfer values for members with more than 3 month’s service in an occupational pension scheme but less than 2 years service who elect to take such a transfer value instead of a refund or a paid-up benefit. No other transfers (other than OMO, see below) will be allowed. The transfer rule will be reviewed in 2017. – again the review group recommends that this should be rescinded and the current transfer regulatory regime reviewed to make it easier for people to transfer when they move jobs.Because of the way that the NEST scheme is being set up, there will be no trustee discretion when paying out death benefits. As such, this means that any death benefit payments will fall within the estate. Depending on the total value of the estate, this could therefore mean that the death benefits will be subject to Inheritance Tax. Normally, GPPs, GSHPs and occupational trust based schemes can pay the death benefits in line with trustee discretion, therefore making them IHT free.Bullets in italics represent our best current guess based on PADA consultations and industry reports only.There will be low cost default fund options. These may be target date funds. Ethical or religious funds may be available at extra cost to the saver.When a member reaches retirement, their choice will probably be restricted to Pension Commencement Lump Sum of 25% of the benefits value plus an annuity (possibly chosen from a panel) and/or an Open Market Option where more sophisticated decumulation options are required by the individual. In the case of small funds, these will be available as trivial lump sums within the normal limits - £18,000 including all other pensions.The charging structure has not yet been defined but we expect it to be low – possibly as low as 0.3% AMC plus a 2% contribution charge to repay the Government loan NEST will need to set itself up.

Auto-Enrolment Road Show: Wirral Auto-Enrolment Road Show: Wirral Presentation Transcript

  • Auto-Enrolment What You Need to Know Tranmere Rovers Football Club Wednesday 26th February – 8:00am - 10:00am
  • About Us Justine Watkinson Richard Landsberg Paul McGerty Rachel Hughes Alison Hale
  • The Employer Duties Alison Hale Adviser at McLintocks Wealth Management Offering independent financial advice, specialising in the provision of pension and wealth management services for Individuals, Companies and Trusts
  • The Employer Duties A quick guide to automatic enrolment and the employer duties
  • The Employer Duties From October 2012 every UK employer must: • register with The Pensions Regulator (TPR) & provide details of workforce and pension scheme • automatically enrol certain workers • arrange membership of a pension scheme for other workers
  • The Employer Duties • The employer duties will be introduced in stages from October 2012 • The staging date is the date that your employer duties first apply • It’s based on the number of people in your largest Pay As You Earn (PAYE) scheme
  • The Employer Duties You’ll have separate duties for three different types of worker: Eligible jobholders Non-eligible jobholders Entitled workers
  • The Employer Duties The different categories of worker are determined by their age and how much they earn: N.B. These figures are for the 2013/14 tax year
  • Employer Duties: Eligible Jobholders You must: • Provide certain information to the pension scheme and eligible jobholder • Automatically enrol them into an automatic enrolment scheme • Deduct any jobholder contributions from salary and make contributions on their behalf • Process any opt-out notices and refund contributions paid
  • Employer Duties: Eligible Jobholders You must also: • Roughly every three years re-enrol those who have previously opted out, stopped making contributions or ceased membership more than 12 months before each re-enrolment date • Keep records of the automatic enrolment and opting out processes and provide to TPR if requested • Provide certain information to the eligible jobholder within two months if they’re already in a qualifying pension scheme
  • Employer duties: non-eligible jobholders You must: • Provide certain information to the non-eligible jobholder including their right to opt in to an automatic enrolment scheme • Arrange pension scheme membership • Deduct any jobholder contributions from salary and make contributions on their behalf • Process any opt-out notices and refund contributions paid
  • Employer duties: non-eligible jobholders You must: • Re-assess worker type roughly every three years and re-enrol those who have previously opted out, stopped making contributions or ceased membership more than 12 months before each re-enrolment date • Continue to assess the non-eligible jobholder in case they change category depending on age and earnings
  • Employer duties: non-eligible jobholders You must also: • Keep records of the enrolment, opting in and opting out processes and provide to TPR if requested • Provide certain information to the noneligible jobholder within two months if they’re already in a qualifying pension scheme
  • Employer duties – entitled workers You must: • Provide certain information about their right to join a pension scheme • Arrange pension scheme membership (the scheme doesn’t have to be an automatic enrolment scheme) • Deduct contributions from their salary and pay these into the scheme (you are not required to make contributions although you can choose to do so)
  • Employer duties – entitled workers You must also: • Continue to assess the entitled worker in case they change category depending on age and earnings • Keep records of the joining process and provide to TPR if requested • If the entitled worked is already in a pension scheme run by you, you don’t have to provide them with any information.
  • Automatic Enrolment Schemes These must meet 3 sets of criteria: • Automatic enrolment criteria • Qualifying criteria • Quality requirements
  • Qualifying Earnings The minimum contribution level to meet the contribution quality requirement is based on qualifying earnings Qualifying earnings are a band of earnings of more than £5,668 and £41,450 or less2 2 These are the figures for 2013/14 and are expected to change each year.
  • Qualifying Earnings The minimum contribution level can be phased in over six years: Contribution rates required to meet the contribution quality requirement as a percentage of qualifying earnings 3 Total must be at least Employer must contribute at least October 2012 to September 2017 2% 1% October 2017 to September 2018 5% 2% October 2018 onwards 8% 3% Date 3 Agreement must be in place for jobholder to make up at least any difference between the total and the employer amount.
  • Certification You can certify that your scheme meets the quality requirement The certificate can cover all workers or groups of workers in your scheme The minimum contribution levels for certification can be phased in over six years from October 2012
  • Pensions Regulator The Pensions Regulator will: Tell employers when their staging date is Provide guidance and Have the power to impose penalties information about the on employers, including a fixed penalty notice of £400 & escalating employer duties penalties if you fail to comply
  • Inducement 4 The rules about inducement apply to all employers from 1 July 2012.
  • Options For Employers to be Compliant • NEST • Employer sponsored Auto-Enrolment Scheme • Payroll
  • ‘NEST’ • Trust based Defined Contribution scheme • Maximum contribution £4,500 (2013/2014) • Limited investment choice • No transfers in or out • No trustee discretion on death • 0.3% amc plus 1.8% contribution charge Sources: Personal Accounts Delivery Authority, ‘Frequently asked questions about NEST’, http://www.padeliveryauthority.org.u k/nest-faqs.asp DWP/PADA, ‘Pensions - Consultation on draft scheme order and rules ‘ 28 April 2009. Money Marketing, “IHT risk makes personal accounts less attractive”, 3 November 2009.
  • Information All of the information is based on our current understanding of the relevant legislation and regulations (including drafts) and may be subject to change. • McLintocks Wealth Management Limited is an appointed representative of Premier Pensions and Tax Consultancy Beech Court Business Center, Moss Brow, Lymm, Cheshire WA13 9TL is authorised and regulated by the Financial Services Authority. Under FCA Register number is 482631. • Our permitted business is advising on and arranging investments. • You can check this on the FCA’s Register by visiting the FCA’s website http://www.fca.org.uk/firms/systems-reporting/register/search or by contacting the FCA on 0800 111 6768.
  • Auto-Enrolment The Administrative Burden Richard Landsberg ACA Manager McLintocks Chartered Accountants & Business Advisors
  • Auto-Enrolment The Administrative Burden • • • • Preparation Initial & ongoing assessment Processing payroll E-Payslips
  • Preparation • Preparation is key • Start planning 18 months in advance • Sage Pension Centre - Create personalised action plan - Deal with existing/new pension arrangements - Cost forecasting - Communication with employees - Progress tracking
  • The Pension Centre
  • Auto-Enrolment Action Plan
  • Initial & Ongoing Assessment • Sage Pensions Module • Profile your workforce - Status, age and earnings - Eligible/non-eligible jobholder or entitled worker - Manage postponements - Probation Period - Pay spikes
  • Initial & Ongoing Assessment • Deal with opt-ins and opt-outs - Stop deducting contributions - Refund contributions already taken • Triennial re-enrolment • Responsibility to assess workforce every pay run • Requirements to inform employees
  • Pensions Module
  • Processing Payroll • Sending information to pension providers - Different formats - Automatically produce reports - Direct link to the leading providers • Processing payments to pension providers
  • Processing Payroll • Detailed audit trail - Record of all data and payment submissions - Store receipts from pension providers - Keep track of communications with employees - Statutory requirement to keep records • Time consuming process - Sage Auto-Enrolment Calculator
  • Auto-Enrolment Calculator Action Select employees, run report & check data Manage postponement Apply pension schemes to those enrolled Manage opt in and opt outs Export data reports from pension software Consolidate data for pension provider report Add fields not covered by payroll software Check report & upload to pension provider Letters to employees Make pension payments Deal with employee queries Data issues with pension provider TOTAL Minutes 5 12 8 8 9 20 20 16 48 4 40 40 230
  • E-Payslips • Employees have access to online portal • Benefits to employee - Access to payslips & documents in one place - 24/7 access from anywhere - Notifications - Emails - Smartphone app
  • E-Payslips • Benefits to employer - Speed up delivery of payslips to employees - Securely send information to employees - Reduce costs
  • Summary • • • • Prepare an action plan Ongoing demands of auto-enrolment The right software and experience is essential Benefits of e-payslips
  • The Pension Problem Paul McGerty Director McLintocks Chartered Accountants & Business Advisors
  • Overview • The Pension Problem – a few statistics to give a flavour of the issues and the costs • A Recap on the Contributions • Managing the Costs & Employees –some suggestions • And finally don’t forget……Pensions are Good!
  • The Pension Problem Just to give a flavour of the problem……… • The total liabilities of the UK Defined Benefit pension schemes now tops £1 trillion, with the deficit hitting £200 billion; • Contributions to personal pensions have fallen by more than £1 billion in the tax years from 2009/10; and • 430,000 fewer investors saved into a personal pension in 2009/10 compared to 2008/9 onwards. Among those who were saving, the average annual contribution fell from £945 to £886.
  • The Pension Problem • Pre- AE, a report from the Department for Work and Pensions shows that only 27% of private sector workers belonged to a work-based pension scheme; • The report showed that Stakeholder pensions were the most common type of workplace pension but that only one-fifth of employers providing them made a contribution towards them for their employees; and • The above decline in pension saving highlights the importance of the auto-enrolment rules which arrived in 2012 - with the solution placed firmly at the employer’s feet!!!
  • A Recap on the Contributions • A minimum of 8% of an employee's qualifying earnings must be paid into a pension, which is made up of: - 3% employer contributions - 5% employee contributions, of which 1% comes in the form of tax relief; and • It is important to note that employers may choose to pay more than the minimum of 3%, in which case the compulsory 5% employee contribution will be lower, providing that the minimum combined pension contribution is 8%.
  • The Contributions • The above could have a large cost implication for some employers, particularly small ones; • A survey conducted by Watson Wyatt shows that the current average contribution for FTSE-100 companies is about 15%; and • Most larger organisations will not have a problem - For smaller organisations the headline rate is much closer to the 8% figure and many put in less than that…if anything at all!!!!
  • Managing Costs and Employees Some suggestions: • One of the challenges that many employers face is how to balance the long-term affordability of their pension contributions with the needs of their staff; • For some organisations, their current employer contribution levels may be unsustainable once the reform takes effect and all staff have to be auto-enrolled into a pension scheme; • In the case of money purchase pension schemes employers have a number of options…
  • Managing Costs and Employees • Ring-fence existing higher contribution rates for all employees who are currently members of the scheme and offer a lower employer contribution rate for those employees who join the scheme through auto-enrolment; • This ensures that those employees who were members of the organisation’s pension scheme prior to auto-enrolment are not penalised, although this may cause disharmony among any employees who receive the lower employer contribution level who may feel that they are being disadvantaged.
  • Managing Costs and Employees • The other option is to level down employer contribution levels for existing pension scheme members to a lower rate, which will be offered to all employees who join via auto-enrolment; • Organisations wishing to go down this route will need to serve notice of their intention to reduce contribution levels and enter a consultation period with any affected staff and clearly legal advice is required • While reducing contribution rates may help to balance the books, employees who are affected are likely to feel they are being unfairly penalised by a reduced monies going into their pension pot.
  • Managing Costs and Employees • It is also important to bear in mind that organisations that have to offer reduced contributions or the minimum 3% employer contribution rate may suffer a backlash from employees • Employees will then need to contribute 5% (including 1% tax relief) of their salary (or band earnings where appropriate) into their pension
  • Managing Costs and Employees • This is unlikely to go down well with many employees who will see a reduction in their take-home pay. • Employers will need to effectively manage staff’s perceptions around pensions as many may blame their employers for this change, regardless of the fact that it is actually a government requirement!!!
  • Managing Costs and Employees • One further option that employers may wish to consider to help to manage any cost increases is the introduction of salary sacrifice. • Via this method, employees elect to reduce their salary and have their sacrificed salary paid into their pension. • As the employer will not have to pay National Insurance (NI) on the sacrificed salary, this contribution can be enhanced by redirecting the NI saving into the employee’s pension
  • Managing Costs and Employees • Organisations with no current pension scheme in place may wish to start giving a proportion of annual pay increases in the form of an employer pension contribution over the next 1,2 or 3 years, for example: 2% pay increase awarded to staff = 1% increase in employee’s salary 1% employer pension contribution
  • Managing Costs and Employees • Whichever route employers choose to manage the likely cost of pension reform, a good communication strategy is essential to ensure that staff are aware of any changes and how this will affect them; • It may also be sensible to work with an adviser to provide staff with access to financial advice and to support them with their individual retirement planning; and • This helps with the ‘de-personalising’ of the changes also, i.e. reiterating the change is government enforced, not by the employer!!
  • Don’t forget…Pensions are Good!!!! There are numerous benefits in contributing to a pension scheme. For pension schemes registered with HM Revenue & Customs (HMRC), extensive tax relief is available: • employees' contributions attract income tax relief; • employer's contributions qualify for corporation tax relief (where the employer is a corporation). If the employer is unincorporated (for example partnerships) they may be subject to income tax relief • scheme investments qualify for income tax and capital gains tax relief; and • This makes pensions a tax-efficient way of increasing employee benefits and remuneration
  • Our Employment Law Speakers Justine Watkinson is Head of Employment Law at Hillyer McKeown. Rachel is a Solicitor in our experienced Employment Law Team.
  • Pensions Enrolment - The Legal Part… Provision of Prescribed Information • Duty to provide specific information to the workers • Strict time scales – one month or six weeks before staging date • Good practice to provide information at least 6 months prior to the staging date
  • Pensions Enrolment - The Legal Part… Provision of Prescribed Information • Write to the employee • Confirm their legal position re pension, the date of enrolment, how much they need to contribute, the employer’s contribution, their right to opt out • Use a prescribed template
  • Pensions Enrolment - The Legal Part… Practical Tip - communicating the pension changes • Consider how the changes will be communicated to employees • At least 6 months prior to the staging date
  • Pensions Enrolment - The Legal Part… Contractual Change • Amend contract of employment • New term to include the pension provider details and who the employee can obtain information from
  • Pensions Enrolment - The Legal Part… Contractual Change • Statement to confirm whether the employee’s employment has contracted out of the state pension • No requirement to obtain “consent” for the change as it is a statutory requirement for eligible job holders
  • Employment Law Update Transfer of Undertakings – 31st January 2014 • Pre-transfer redundancy consultation – now counts as information and consultation under reg 13(1) Tupe • Micro businesses can inform and consult directly
  • Employment Law Update Transfer of Undertakings – 31st January 2014 • Variations to T&Cs allowed for an economic, technical or organisational reason(“ETO”) or the contract permits a variation • Redundancies because of change in location no longer automatically unfair
  • Employment Law Update Transfer of Undertakings – 31st January 2014 • Service provision change – activities undertaken by the new service provider must be “fundamentally the same”
  • Employment Law Update Transfer of Undertakings – 1st May 2014 • Employee Liability Information deadline – increased from 14 days to 28 days
  • Employment Law Update Early Conciliation – 6th April 2014 • Applies to all Tribunal claims from 1 April • Claimant must contact ACAS
  • Employment Law Update Early Conciliation – 6th April 2014 • Conciliation between the Claimant and Respondent for one month • Claimant cannot issue a claim until after the one month window
  • Employment Law Update Use of Social Media By Employees • Lots of tribunal activity in this fast paced area, and Employers/law struggling to keep up!! • Changes in the use of social media
  • Employment Law Update Use of Social Media By Employees • Employers uncertain of when disciplinary action is justified • Freedom of speech v gagging employees
  • Employment Law Update How should employers deal with social media? • Set clear guidelines • Update and amend your social media policy, grievance and bullying policies • Make clear which actions amount to misconduct and gross misconduct
  • Thank You Any Questions? www.hillyermckeown.co.uk www.mclintocks.co.uk