Automatic Enrolment
Creating a road map for your
business
Supporting you
every step of the way
John Carter DipPFS
Roadmap
•Background – Why Auto Enrolment
•Employer Duties
•Contribution options
•Admin Duties
•Middleware
•Staff Communica...
Why Auto Enrolment?
People are living longer
Historic and projected life expectancy at age 65 UK
(years)
Men

Women

18

14

1981

23.7

21

2...
It’s unaffordable
Total projected expenditure on state pensions and related
benefits, 2011/11 to 2050/51
£billions, 2011/1...
Inflated Retirement Expectations
• Basic State Pension is currently?

£110.15 per week (£5727.80 pa)
• For a £20K Personal...
Employer Duties
Employer Duties
• Implement an Auto Enrolment compliant
pension scheme
• By the staging date set by the DWP
• Maintain the...
EASY!!
The Rules
Assessing worker type
The different types of worker
Age (inclusive) 
22 – SPA

16 - 21
Earnings

SPA - 74

Under lower qu...
1,200,000
Employers

11,000,000
Employees
When will it happen?

Voluntary start

“Test tranche”
<30

250 or more

July
2012
Oct
2012

249
to 50

April
2014
Feb
2014...
It’s OK, I can wait until my staging date!
Capacity Crunch
• Provider ability to respond?

• Availability of advice?
• Tim...
Staging profile to
May 2015

Source: payrollworld.com
And in real numbers ……..

Source: TPR / PW
Contribution Options
& Scheme Design
Contribution options?
 Defined Contribution – will be phased in to:

8% ‘Banded Earnings’ total

3% ‘Banded Earnings’ emp...
Band Earnings
 Earnings thresholds:
Earnings £

£41,4501

Contributions paid

£9,4401
£5,6681
Not auto-enrolled
0

Source...
Phasing
Transitional

Duration

Employee

Total min

contribution

Period

Employer min

Pays

contribution

Phase 1

Empl...
Contribution options
3 additional certification options:
 A minimum of 9% contribution of pensionable pay (including at l...
Contribution options
• 3 acceptable definitions:
DEFAULT

1

2

£50,000

3
Total earnings
Basic earnings

£41,450

<15%

E...
Salary Exchange/Sacrifice
£100 net employee contribution
Pension Exchange Amount

Basic Rate

£147.06

Employer’s NI Savin...
Potential Savings could offset the
costs …………
30 employees

@ £20.29 NI saving per month

Monthly Payroll Saving

=

£608....
SEGMENTATION
Directors

Sales People
Generic Provider
9% Basic Pay

General Staff
See
Generic Provider (People’s
Pension /...
Admin Duties
Admin duties
Employers MUST

Employers MUST NOT

Auto enrol and re-enrol/deduct payments
Register/re-register their scheme...
Or else...
Stage 1 - Warning

Compliance/unpaid contribution notice

Fixed penalty - £400

Stage 2 – ‘Wake up call’

Escal...
11 Months in and changes already ………..
• Aligning assessment pay reference period with tax periods (RTI?)
• Defining pay r...
Middleware
Middleware
Integrated software to interface with;
• Payroll
• HR
• Pension provider
• Employees
Purpose to assess in each ...
Pension

New Joiner Data

Contribution Data

Opt Out
Indicators

Salary Data

Middleware
Platform

HR

Deductions
Salary S...
MIDDLEWARE CHOICES
Option 1

Option 2

Option 3

• Generic Package

• Bespoke Package

• Bespoke Package

• Insurer Suppli...
RANGE OF SOLUTIONS
OPTION 1

OPTION 2

OPTION 3

• Bespoke Offering

• Bespoke Offering

• Generic Offering

• Auto Enrolm...
Communication
Communication!
• Implementers
– Payroll/Management/HR/Finance etc

• Employees
– Surgeries / One to Ones
– Member packs
– ...
Official Suggested Timelines

Source: TPR
Summary
Step 3 – Run
Step 1 – Design a Step 2 – Implement
the scheme in the
the changes
solution for your
most efficient w...
Staging Dates
2,000 – 2,999 members

1st August 2013

1,250 – 1,999 members

1st September 2013

800 – 1,249 members

1st ...
Updates and Social Media
John Carter
ProAktive

@ProaktivePeggy
@ProaktivePeople
ProAktive House
Sidings Court
White Rose ...
Any Questions?
ProAktive's approach to Auto Enrolment (pensions).
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ProAktive's approach to Auto Enrolment (pensions).

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Here's a copy of our presentation from the free breakfast briefing we held in January 2014. Auto Enrolment is mandatory legislation to all companies in the UK, starting from October 2012. If you have questions that need answering or would like us to help you with this process, please get in touch. 01302 341 344.

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  • Hobbits.
  • In reality there are considerably more than 7 stages and the employers duties actually come from 2 pension acts, 15 sets of pension regulations and 12 guides.
  • ProAktive's approach to Auto Enrolment (pensions).

    1. 1. Automatic Enrolment Creating a road map for your business Supporting you every step of the way John Carter DipPFS
    2. 2. Roadmap •Background – Why Auto Enrolment •Employer Duties •Contribution options •Admin Duties •Middleware •Staff Communication
    3. 3. Why Auto Enrolment?
    4. 4. People are living longer Historic and projected life expectancy at age 65 UK (years) Men Women 18 14 1981 23.7 21 2010 Source: Office for National Statistics, Pension Trends Chapter 2, 16 February 2012. 28.3 25.9 2051
    5. 5. It’s unaffordable Total projected expenditure on state pensions and related benefits, 2011/11 to 2050/51 £billions, 2011/12 prices 250 196 142 84 92 97 2010/11 2015/16 2020/21 2030/31 Source: Office for National Statistics, Pension Trends Chapter 5, 27 October 2011. 2040/41 2050/51
    6. 6. Inflated Retirement Expectations • Basic State Pension is currently? £110.15 per week (£5727.80 pa) • For a £20K Personal Pension income (Start Saving at 40)? £799 per month * assuming 7% growth and current annuity rates
    7. 7. Employer Duties
    8. 8. Employer Duties • Implement an Auto Enrolment compliant pension scheme • By the staging date set by the DWP • Maintain the scheme in accordance with applicable legislation
    9. 9. EASY!!
    10. 10. The Rules
    11. 11. Assessing worker type The different types of worker Age (inclusive)  22 – SPA 16 - 21 Earnings SPA - 74 Under lower qualifying earnings threshold £5,668 or less Entitled worker – can join More than £5,668 up to £9,440 Non-eligible jobholder – can opt-in Over automatic enrolment earnings trigger - £9,440 (up to £41,451 for band earnings) Non-eligible jobholder – can opt in Eligible jobholder AUTOMATIC ENROLMENT * Automatic Enrolment (Earnings Trigger and Qualifying Earnings Band) Order 2012 Non-eligible jobholder – can opt in
    12. 12. 1,200,000 Employers 11,000,000 Employees
    13. 13. When will it happen? Voluntary start “Test tranche” <30 250 or more July 2012 Oct 2012 249 to 50 April 2014 Feb 2014 49 to 30 April 2015 Aug 2015 June 2015 <30 and no PAYE Oct 2015 Jan 2016 New employers Apr 2012 to Sep 2017 May 2017 Apr 2017 Feb 2018
    14. 14. It’s OK, I can wait until my staging date! Capacity Crunch • Provider ability to respond? • Availability of advice? • Timeframe for set-up • Budget Planning?
    15. 15. Staging profile to May 2015 Source: payrollworld.com
    16. 16. And in real numbers …….. Source: TPR / PW
    17. 17. Contribution Options & Scheme Design
    18. 18. Contribution options?  Defined Contribution – will be phased in to: 8% ‘Banded Earnings’ total 3% ‘Banded Earnings’ employer minimum Jobholder can be required to make up the difference  ‘Qualifying Earnings’  Between £5,668 - £41,450*  Includes overtime, SSP, SMP etc * Automatic Enrolment (Earnings Trigger and Qualifying Earnings Band) Order 2012
    19. 19. Band Earnings  Earnings thresholds: Earnings £ £41,4501 Contributions paid £9,4401 £5,6681 Not auto-enrolled 0 Source: Automatic Enrolment (Earnings Trigger and Qualifying Earnings Band) Order 2012
    20. 20. Phasing Transitional Duration Employee Total min contribution Period Employer min Pays contribution Phase 1 Employer's staging date to 30 September 2017 1% 1% 2% Phase 2 1 October 2017 to 30th September 2018 2% 3% 5% 1 October 2018 onwards On-going 3% 5% This is for the default “banded earnings” certification. Other certifications will vary. Contractual entitlements are not considered in this example. Source: Making automatic enrolment work, Report for the DWP October 2010 8%
    21. 21. Contribution options 3 additional certification options:  A minimum of 9% contribution of pensionable pay (including at least 4% employer contribution)  A minimum 8% of pensionable pay (3% employer) provided pensionable pay constitutes at least 85% of the total pay bill  A minimum 7% contribution of earnings (3% employer), provided that 100% of total pay is pensionable OR • “Qualifying Scheme” - The scheme already meets all of the AE requirements Source: Making automatic enrolment work, Report for the DWP October 2010
    22. 22. Contribution options • 3 acceptable definitions: DEFAULT 1 2 £50,000 3 Total earnings Basic earnings £41,450 <15% Earnings £ >15% Basic earnings 8% 7% 8% 9% £9,440 £5,668 0 1. If the definition of pensionable pay is total earnings then a 7% contribution rate is acceptable 2. If total pensionable earnings equate to at least 85% of the total wage bill, then 8% is acceptable 3. If pensionable earnings are less than 85% of total earnings then a 9% contribution is acceptable
    23. 23. Salary Exchange/Sacrifice £100 net employee contribution Pension Exchange Amount Basic Rate £147.06 Employer’s NI Saving £20.29 Total Invested ?????? Pension Exchange Amount Higher Rate £172.41 Employer’s NI Saving £23.79 Total Invested ??????
    24. 24. Potential Savings could offset the costs ………… 30 employees @ £20.29 NI saving per month Monthly Payroll Saving = £608.70 Annual Payroll Saving = £7304.40
    25. 25. SEGMENTATION Directors Sales People Generic Provider 9% Basic Pay General Staff See Generic Provider (People’s Pension / NEST/Insurer) 8% Banded Earnings Senior Managers GPP 7% Total Pay
    26. 26. Admin Duties
    27. 27. Admin duties Employers MUST Employers MUST NOT Auto enrol and re-enrol/deduct payments Register/re-register their scheme Provide information to eligible and noneligible jobholders Discourage membership Give jobholders the opt-out form Encourage opt-outs Provide information to scheme/provider Use ‘Prohibited recruitment conduct’ Process opt outs/make refunds Give advice Keep records Sources: Pensions Act 2008, The Occupational and Personal Pension Schemes (Automatic Enrolment) Regulations 2010.
    28. 28. Or else... Stage 1 - Warning Compliance/unpaid contribution notice Fixed penalty - £400 Stage 2 – ‘Wake up call’ Escalating penalty Stage 3 – Persistent offenders Workers 1-4 5-49 50-249 250-499 500+ Sources: Pensions Act 2008, Chapter 2, The Occupational and Personal Pension Schemes (Automatic Enrolment) Regulations 2010. For professional advisers only Penalty per day £50 £500 £2,500 £5,000 £10,000
    29. 29. 11 Months in and changes already ……….. • Aligning assessment pay reference period with tax periods (RTI?) • Defining pay reference periods for quality assessment • Consistency of contribution payment deadlines for all joiners • Jobholders opting out “before” Auto Enrolment • Clarification of the opt-out notice, and extension of the joining window • Test scheme standard for DB schemes, and quality requirements • Exclusion of certain workers from Auto Enrolment • “Other possible options” for employers with “good” pension schemes
    30. 30. Middleware
    31. 31. Middleware Integrated software to interface with; • Payroll • HR • Pension provider • Employees Purpose to assess in each payment period eligible employees, notify new auto-enrolment joiners by age, salary, new starters, staff that have opted out and need re-enrolling after 3 years etc.
    32. 32. Pension New Joiner Data Contribution Data Opt Out Indicators Salary Data Middleware Platform HR Deductions Salary Sacrifice New Hires Re-Joiners Scheme Decisions Updates Payroll Opt-Out Re-join Employees Valuations
    33. 33. MIDDLEWARE CHOICES Option 1 Option 2 Option 3 • Generic Package • Bespoke Package • Bespoke Package • Insurer Supplied • Auto Enrolment Middleware • Auto Enrolment Middleware • Staff Intranet • Staff Intranet • Scheme Segmentation • Scheme Segmentation • Full Reporting • Full Reporting • Basic AE Middleware • Online Payslips • Lifestyle Benefits
    34. 34. RANGE OF SOLUTIONS OPTION 1 OPTION 2 OPTION 3 • Bespoke Offering • Bespoke Offering • Generic Offering • Auto Enrolment Integration and Management • Auto Enrolment Integration and Management • Insurer Supplied • Full Employee Benefits Package • Staff Intranet • Online Payslips • Staff Intranet • Lifestyle Benefits • Auto Enrolment Integration and Management • Tied to Insurer and potentially dependent upon segmentation
    35. 35. Communication
    36. 36. Communication! • Implementers – Payroll/Management/HR/Finance etc • Employees – Surgeries / One to Ones – Member packs – Reviews / Retirement Advice • Insurer/schemes
    37. 37. Official Suggested Timelines Source: TPR
    38. 38. Summary Step 3 – Run Step 1 – Design a Step 2 – Implement the scheme in the the changes solution for your most efficient way effectively business
    39. 39. Staging Dates 2,000 – 2,999 members 1st August 2013 1,250 – 1,999 members 1st September 2013 800 – 1,249 members 1st October 2013 500 – 799 members 1st November 2013 350 – 499 members 1st January 2014 250 – 349 members 1st February 2014 From (inc.) To (inc.) 50 to 249 members 1st April 2014 1st April 2015 Test tranche for less than 30 members 1st June 2015 30th June 2015 30 to 49 members 1st August 2015 1st October 2015 Less than 30 members 1st January 2016 1st April 2017
    40. 40. Updates and Social Media John Carter ProAktive @ProaktivePeggy @ProaktivePeople ProAktive House Sidings Court White Rose Way Doncaster DN4 5NU 01302 341344 John Carter 07725 258283 johncarter@proaktive.co.uk Proaktive is a trading name of Atkinson Smith (Financial Services) Ltd. Authorised and Regulated by the FCA
    41. 41. Any Questions?

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