Key employer duties 1. From staging date, enrol “eligible jobholders” automatically into an automatic enrolment scheme 2. Pay minimum DC contributions or provide minimum DB benefits 3. Re-enrol eligible jobholders who opt-out approx every 3yrs
Other employer duties• Provide eligible jobholders, non-eligible jobholders and entitled workers with prescribed information• Register with Pensions Regulator within 4 months of “staging date”• Keep records of auto-enrolments, opt-ins, opt-outs and contributions • legally, for at least 6 years (4 years for opt-outs) • practically, for much longer• Not to induce opt-outs
Worker categories and rightsEarnings Age 16-21 Age 22-SPA SPA- age 75 Non-eligible Eligible Non-eligible£8,105+ in jobholder – jobholder – jobholder –2012/13 may opt-in to an must be auto- may opt-in to an(£9,440+ in automatic enrolled into an automatic2013/14) enrolment automatic enrolment scheme enrolment scheme scheme£5,564 - Non-eligible jobholder – may opt-in to an automatic£8,105 enrolment scheme(or £9,440)Less than Entitled worker – can request to join a pension scheme (but it does not have to be a qualifying scheme£5,564 and not entitled to employer contributions)
Opting-out• Eligible jobholders and non-eligible jobholders who opt-in can opt-out within 1 month and receive a refund of their contributions, but: – not before they have been auto-enrolled – opt-out paperwork must normally come from scheme – employer must not incentivise opt-outs – employers must re-enrol roughly every 3 years• Can leave scheme after statutory opt-out window• Beware workers with enhanced/fixed protection!
When?• Phased introduction from 1 Oct 2012 – see www.tpr.gov.uk/staging• ‘Staging date’ determined by number of people in employer’s PAYE payroll scheme on 1 April 2012• What about: – employers with more than one payroll scheme? – multi-employer payroll schemes? – small employers in large payroll scheme?
When?Size of payroll scheme Staging dateon 1 April 2012120,000 – 10,000 1 Oct 2012 – 1 Mar 20139,999 – 250 1 Apr 2013 – 1 Feb 2014249 – 50 1 Apr 2014 – 1 Apr 2015Less than 49 1 June 2015 – 1 Apr 2017New employers 1 May 2017 onwards
Question for you ....• How do you intend to deal with eligible jobholders who have fixed or enhanced protection? a) enrol them b) enrol them plus side conversation c) not enrol them
Session 2Which staff are included and possible penalties
Who is a “worker”?In scope Out of scope Employees x Self-employed Those performing x One person companies work personally and x Office holders not as part of own x Volunteers business What about? agency staff ? casual/zero hours staff?
International workers• AE only applies to workers who are “working or ordinarily working in the UK”• Question of fact – useful guidance on secondments
Safeguards for workers Eligible Non-eligible Entitled jobholders jobholders workersProhibitedrecruitment X X XconductNot to be unfairlydismissed or sufferdetriment ongrounds related to X X Xnew employerdutiesInducements X X X Note – safeguards in force since 1 July 2012
Enforcement by the Pensions Regulator • Compliance noticeStage 1 • Unpaid contributions notice • Fixed penalty noticeStage 2 • £400 • Escalating penalty noticeStage 3 • £50 - £10,000 per day
TUPE and auto-enrolment• TUPE Pensions Protection Regulations –v- auto- enrolment• Duty to automatically enrol transferring employees?• Use of past opt-outs not allowed
Question for you ....• Which department within your organisation do you think is the most appropriate to lead the AE initiative and monitor compliance? a) Pensions b) HR c) Payroll d) IT e) Legal
Session 3Using existing schemes and managing costs
Using an existing scheme• An automatic enrolment scheme: (i) must be a qualifying pension scheme, and (ii) must not contain any provisions which: – prevent the employer fulfilling its auto-enrolment and re-enrolment duties, and – require a member to make a choice or provide information• Review eligibility/admission requirements• Default fund required
What is a qualifying pensionscheme?• To be a qualifying pension scheme, a scheme must: – be an HMRC registered occupational or personal pension scheme operating automatic enrolment; and – meet minimum "quality standards"
Minimum DC contributions• Minimum employer DC contributions to be phased-in over 5 years Date Minimum employer Minimum total contribution contribution (% of qualifying earnings) (% of qualifying earnings)Staging date – 1% 2% Sept 2017 Oct 2017 - 2% 5% Sept 2018From Oct 2018 3% 8%
Qualifying pension scheme - DC• Total contributions of 8% of “qualifying earnings” (min 3% employer)OR• Total contributions of 9% of “pensionable earnings” (min 4% employer) – where pensionable earnings are equal to or greater than basic payOR• Total contributions of 8% of “pensionable earnings” (min 3% employer) - where at least 85% of total earnings of all eligible jobholders is pensionableOR• Total contributions of 7% of “earnings” (min 3% employer) – i.e. contributions are payable on all earnings
Qualifying pension scheme - DB• Contracted-outOR• Contracted-in with: – pension for life at state pension age – annual accrual rate of 1/120th of average “qualifying earnings” in last three tax years preceding the end of pensionable service up to maximum of 40 years, and – statutory revaluation and pension increases• Additional requirements apply to hybrid schemes and average salary schemes
Question for you ....• Which pension arrangement is your organisation going to use for auto enrolment? a) trust based DC scheme b) contract based DC scheme c) DB scheme d) external Master Trust e) unsure
Saving costs - ‘postponement’• Employers can operate a waiting period of up to 3 months by giving notice to workers• May help with: – casual/seasonal workers – temporary workers – quick leavers – alignment of auto-enrolment with payroll• Jobholders’ right to opt-in
Transitional period for DB schemes• Employers with open DB/hybrid schemes can delay auto-enrolment until 1 October 2017• Only applies to certain eligible workers• Must give notice and auto-enrol into appropriate scheme at end of transitional period• Worker can still opt-in to a qualifying scheme
Saving costs - salary sacrifice• Employers can continue to use salary sacrifice but need to consider: – right to opt-out and HMRC guidance – how to implement – timing of implementation• Salary sacrifice arrangement could bring earnings under trigger
Question for you ....• Of those who don’t already use salary sacrifice to save NI on pension contributions, who would now consider using this mechanism? YES or NO
Conclusion – key action points1 Identify your staging date and work back2 Find an owner and form a working group3 Identify all “workers”4 Check terms of self employment / agency / secondment5 Decide if you want to adapt an existing scheme - or use a new one - or both6 Consider using postponement mechanisms7 Consider using salary sacrifice to save costs8 Consider changes to wider benefits package9 Take account of fixed / enhanced protection10 Allow enough time