Workplacepensions lawis changing...A brief overview When are theabout the new duties changes happening?for employers The new employer duties will be introduced in stages starting from October 2012. EachFrom 2012, changes to pensions law will employer will be allocated a date from whenaffect all employers with at least one worker the duties will first apply to them, known asin the UK. This document is a summary ofthese changes, including what employers their ‘staging date.’must do and how they might set about This date is based on the number of people in angetting ready. employer’s PAYE scheme. Employers with the largest numbers of workers in their PAYE schemes will haveWe have published a series of guidance that explains the earliest staging date.the new employer duties in detail and how theyshould be implemented. The guidance is available Employers can check their provisional staging datefor download from our website: on our website: www.tpr.gov.uk/stagingwww.tpr.gov.uk/pensions-reform To allow some flexibility, employers can chooseThe changes in a nutshell to bring forward their staging date, provided the regulator is informed. However, employers cannotEmployers will need to: choose a later date than the one they are allocated.• Automatically enrol certain workers into Finding out when the staging date is likely to be is a pension scheme the first thing an employer should do, so they can plan what they need to do to be ready in good time.• Make contributions on their workers’ behalf• Register with The Pensions Regulator (‘the regulator’)• Provide workers with certain information about the changes and how they will affect them.November 2011
Workplace pensions law is changingWhat will employersneed to do?Assess their workforce Choose a pension schemeEmployers will need to assess their workforce to Employers with an automatic enrolment duty willsee what their duties will be in relation to each of need to choose a pension scheme they can use fortheir workers. Employers will need to provide their automatic enrolment. Information from the regulatorworkers with certain information, which will be will be available to help inform this decision lateridentified by this assessment. In particular, in the year.they should find out whether they are likely tohave an automatic enrolment duty, as this will Employers might use an existing scheme or setrequire preparation. up a new one with a pension provider.Identify who to automatically enrol In addition, there is the National Employment Savings Trust (NEST). NEST is a pension scheme withWorkers who need to be automatically enrolled the following characteristics:are called ‘eligible jobholders.’ • It has a public service obligation, meaningAn eligible jobholder is: it must accept all employers who apply• Aged between 22 and state pension age • It has been established by Government to ensure that employers, including those that employ low• Working, or ordinarily working, in the UK to medium earners, can access pension saving and• Earning above a certain amount (currently comply with their automatic enrolment duties. proposed to be £7,475). Whether the scheme an employer uses forThe location of the employer is not relevant when automatic enrolment is new or not, it must meetconsidering if a worker is an eligible jobholder. certain, specific criteria set out in legislation.Neither is the worker’s nationality or the length of The scheme cannot:their stay in the UK. What is relevant is whether theworker is working, or ordinarily working, in the UK. • Impose barriers, such as probationary periods or age limits for membersWhen considering whether a worker’s earningsare above or below the lower earnings limit, an • Require staff to make an active choice to join oremployer needs to look at what is known as the take other action, eg having to sign a form orworker’s ‘qualifying earnings.’ This will include provide extra information to the schemeearnings in salary, overtime, commission, bonuses, themselves, either prior to joining or to retainsick pay, maternity, paternity and adoption pay. active membership of the scheme.It is important for employers to formally assess Each pension scheme will have its own rules, but alltheir workforce and understand what duties might employers will need to provide their scheme withapply. It may be possible for employers to defer this certain information about the person who is beingassessment – by allowing a ‘waiting period’ of up to 3 automatically enrolled.months. More information on waiting periods will beavailable on our website and in the guides publishedlater this year.
Workplace pensions law is changingRegister with the regulator Process opt-in or joining requestsAll employers will need to register with the As well as automatically-enrolling eligibleregulator. This will be an online process. We will jobholders, employers must also put certain otherprovide more information on registration later in workers into a pension scheme, if these individualsthe year. ask. What the employer will need to do depends on the type of worker.Make contributions Certain workers have a right to ‘opt in’ to an automaticMany employers offer a defined contribution enrolment scheme and the employer is required toscheme to staff. The rules of these schemes must arrange this and make employer contributions.require the employer to pay an overall minimumcontribution of at least 8% of the worker’s Other workers have a right to ‘join’ any scheme butqualifying earnings, of which at least 3% of this there is no requirement on the employer to makecontribution must be from the employer. employer contributions in respect of these workers; although the employer must set up the deductionIn most cases, Government tax relief will account of the worker’s contributions from pay. Morefor 1% of the total 8%. information will be available on our website.Employers who already have a pension scheme can Avoid inducements and prohibited activityconfirm that it is suitable for automatic enrolmentby a process called ‘certification.’ More information It is important that any worker’s decision to opton certification will be available on our website. out of a scheme, or stop saving for retirement altogether, should be taken freely and withoutWe have issued technical guidance to payroll system influence by the employer.providers to help them get ready for the changes.‘A guide to workplace pensions reform for software There are safeguards in place from 2012 intendeddevelopers’ can be downloaded from our website: to protect the rights of individuals to have accesswww.tpr.gov.uk/pensoftware to pension provision. These safeguards mean that employers must not take, or fail to take, any action,Process any opt-out notices with the sole or main purpose to attempt to induceWorkers who have been automatically enrolled a jobholder to opt out of a pension scheme. Equally,have the right to opt out of the employer’s pension an employer must not try to screen out job applicantsscheme. There is an opt-out period of 1 month, on grounds relating to potential pension schemewhere any deductions made from their salary will membership, or suggest that a job applicant’s successbe refunded. The worker can choose to cease could depend on whether or not they opt out ofmembership at any time, although they may not be a pension scheme.entitled to a cash refund of contributions after theend of the 1-month opt-out period.To opt out, workers must give notice via a documentcalled an ‘opt-out notice’ to the employer. Thesenotices will usually only be available from the pensionscheme provider and not the employer, so thatworkers do not feel pressured into opting out.When employers receive a valid opt-out noticewithin the 1-month period, they must pay backany contributions deducted from the worker’s pay.Equally, any contributions the employer has mademust be refunded to the employer by thepension scheme.
Workplace pensions law is changingKeep accurate records Provide workers with information about the changesAlong with the requirements described previously,employers must keep specific records about their Employers will need to inform their workersworkers and their pension scheme(s). Most of these about the changes and how those workers arerecords must be kept for a minimum of 6 years. affected by them.Employers can use electronic or paper filing systems The specified information must be provided into keep or store any records, as long as they are writing, which can include being sent by email.legible or can be produced in a legible way if the However, it is not enough just to point individualsregulator asks to see them. to an internet or intranet site, or display a poster in the workplace.Keeping accurate records about workers and thepension scheme helps avoid or resolve potential If the specified information requires personal ordisputes with workers, as well as aide reconciliation individual data to be communicated, it should notof pension contributions. be included in a generic communication. In these circumstances, the employer is likely to have to writeEmployers have a great deal of flexibility to use their to, or email, each worker individually.existing business documentation (eg payroll records)as evidence of keeping a particular record. Where the specified information does not require individual data (eg the information to a jobholderAn employer must also be able to keep track of about their right to opt in), it may be possible tothe ages and earnings of everyone who works for provide the information in a generic communication,them at all times. This is important to retain ongoing such as a joining pack.compliance with the requirements. The duty is on the employer to provide the right information to the right individual at the right time. Someone acting on the employer’s behalf (such as an Independent Financial Adviser (IFA), provider or benefit consultant) can provide the information, but it remains the employer’s responsibility to make sure it is provided on time and is complete and correct.