An upate on auto-enrolment (tPR and Pension PlayPen)

May 2018 DM 6670574 v1 These slides remain the property of The Pensions Regulator and their content should not be altered on reproduction.
The information we provide is for guidance only and
should not be taken as a definitive interpretation of the law.
Payroll and Reward Conference
Chelsea Harbour Hotel
London SW10 0XG
Neil Esslemont
Head of industry liaison
6 June 2018
Automatic enrolment
An update from the regulator

With challenges
Henry Tapper
Founder of Pension PlayPen
– www.henrytapper.com
– www.pensionplaypen.com

May 2018 DM 6670574 v1 These slides remain the property of The Pensions Regulator and their content should not be altered on reproduction.
Topics
• Progress so far
• New employers
• Compliance and enforcement
• Tax relief
• Master trust authorisation
• 2017 Review changes

May 2018 DM 2750193 v9C These slides remain the property of The Pensions Regulator and their content should not be altered on reproduction.
Progress to date
More than 1.2 million employers
have automatically enrolled
jobholders
Over 557,000 workers re-enrolled
by 42,000 employers
Over 9.6 million employees have
been enrolled in workplace
pensions

Point of order!
• You want us to get to know our “workplace pension responsibilities”
What does that mean?
Can we answer these questions?
– “How do I know what I am paying for it?”
– “How do I know what value am I getting from it?”
– “How do I find out how it is invested?”

Quarterly forecast of employers due to comply with AE

Challenge!
A lot of employers re-enrolling!
• Employers have to comply with all the AE regulations
• But what “responsibilities” do they have for their workplace
pension?
What’s most important in the long run-
Compliance or good member outcomes?

• Individuals or organisations who become an employer from 1 October
2017 onwards, do not have a “staging date” (a pre-determined date when
their duties start).
• Their “duties start date” will be the contracted start date of their first worker.
• Postponement can be used in the normal way (ie up to 3 months).
• Employers will have to complete a declaration of compliance within five
months of their duties start date.
• See www.tpr.gov.uk/duties-for-new-employers-from-1-october-2017.aspx
• Employers who have a duties start date who stop employing staff, may not
know they do not have to make another declaration of compliance. If they
employ staff at a later date the original duties start date still applies.
New employers - from 1 October 2017 onwards

New employers have AE duties from October 2017
I’ve
employed
someone
We identify
new employer
in RTI data
We send
employer our
‘Welcome
pack’ letter
Email
reminders
sent
Compliance
and
enforcement
starts
We do not
send any
letters before
duties start
date
AE duties
start date is
contractual
start date of
employee
It is important
to nominate a
contact,
including email
Declaration
deadline may
be later, if
they appear in
RTI data late
Same process
applies to all
new
employers

• We are putting information about AE in places a potential or new employer
would go to for help setting up as a new employer. For example:
– government organisations (eg DWP, HMRC, Gov.uk)
– industry organisations (eg employer bodies, professional bodies, trade
associations)
– pension providers’ websites.
• We would also like the following to communicate to their members / clients:
– business advisers (eg accountants, bookkeepers, IFAs, payroll admin)
– business networks
– payroll/software providers
– information hubs (eg specialist publishers of information for professionals
who provide business support and finance to start ups and small firms)
– retail banks.
How do new employers know about AE?

Challenge!
All these new employers – have to choose a pension
But do they?
Is NEST the default workplace pension?
Do employers know what they are buying for their staff?
And why?

Automatic enrolment
Compliance and enforcement

May 2018 DM 2777032 v10Z These slides remain the property of The Pensions Regulator and their content should not be altered on reproduction.
• Some of our powers used
(to 31 March 2018):
– 524 information notices
– 1,218 statutory inspection notices
– 98,489 compliance notices
– 6,022 unpaid contribution notices
– 43,338 fixed penalty notices
– 9,537 escalating penalty notices
(EPN)
• We publish details of those that have:
– paid their EPN, but remain non-compliant; or
– failed to pay their EPN and are subject to a court order
www.tpr.gov.uk/doc-library/escalating-penalty-notices.aspx
Use of powers
156,402 cases closed by
31 March 2018

• We have successfully prosecuted a Greater Manchester bus firm and its
managing director for deliberately not putting staff into a workplace pension
• Stotts Tours (Oldham) Limited failed to enrol 36 members of staff into a
workplace pension and pay pension contributions from June 2015
• Managing director Alan Stott was accused of either consenting or conniving
in the bus company’s offence, or allowing the offence to be committed by
neglect – and he pleaded guilty to 16 offences.
• Stotts Tours was ordered to pay a £27,000 fine, £7,400 costs and a £120
victim surcharge. Alan Stott was ordered to pay a £4,455 fine and a £120
victim surcharge. In addition, Stotts Tours (Oldham) had £14,400 in civil fines
imposed for non-compliance.
• Stotts Tours must also pay an estimated £10,000 in backdated pension
contributions for its staff, as well as paying all ongoing contributions that fall
due, or they will face further enforcement action from TPR.
• And he now has a criminal record.
First criminal prosecution with bill of more than £60,000

• Crest Healthcare and Sheila Aluko each pleaded guilty to one charge of
knowingly or recklessly providing false or misleading information to TPR and
two charges of wilfully failing to comply with their automatic enrolment duties
when they appeared at Brighton Magistrates’ Court on 7 March.
• The employer said 25 staff had been enrolled into a workplace pension
scheme – and this was not the case.
• Later the employer began deducting pension contributions from the wages of
some workers but kept them in the company’s bank account and did not pay
them into a pension scheme for more than eight months.
• A whistleblower raised the alarm.
• The managing director has been fined over £20,000.
Another criminal prosecution - fine of £20,000

May 2018 DM 2777032 v10Y These slides remain the property of The Pensions Regulator and their content should not be altered on reproduction.
Automatic enrolment
Tax relief on employee contributions

• Many small employers and their advisers may not realise that there are two
ways that the tax relief on staff members’ pension contribution can be applied:
– Net Pay Arrangement (NPA)
– Relief At Source (RAS) - also known as (‘not Net Pay Arrangement’)
• Many pension schemes only support one tax relief method, although some
pension providers allow the employer to choose either method.
• It is vital to understand which system your clients are going to use, to avoid
miscalculating the contributions and tax due.
• For more information look at the ‘tax relief’ section at:
www.tpr.gov.uk/what-to-consider-when-choosing-a-scheme.aspx
• However, if your client is using salary sacrifice for pension contributions then
NPA or RAS does not apply.
Tax relief on members’ pension contributions

• If your client is using salary sacrifice for pension contributions then, for any of
their staff who are participating in this arrangement:
– their contractual salary will have been reduced and, in exchange, the
employer will be paying higher pension contributions
– Net Pay Arrangement or Relief At Source cannot be used for these
contributions, as they are being paid by the employer
– the individual will not pay tax or NI on the sacrificed part of their salary
– but salary cannot be sacrificed to below the national living wage.
• If any of your clients are using salary sacrifice for pension contributions, then:
– the contract could have been written so that the sacrificed amount will
increase in line with the prevailing legal minimums
– or the salary sacrifice contract may need to be changed to reflect the
higher contribution rates applicable from 6th April 2019
– or any increase in employee contributions due would need to be deducted
from pay.
Salary sacrifice / salary exchange

Point of order!
Who picks up if salary sacrifice is taking
someone below the national living
wage?

Applying tax relief on staff contributions†
Net Pay Arrangement (NPA) Relief At Source (RAS)
Staff contribution is taken gross (£1 for
£1), before tax has been deducted
Staff contribution is only 80p in the £1,
after tax has been deducted
No tax is deducted from the employee’s
pension contribution
The pension provider will claim 20p in the
£1 from HMRC and add it to the pension
pot (even if they are not paying any tax)
Currently, for a legal minimum pension,
1% of gross qualifying earnings should
be taken from their gross pay
Currently, for a legal minimum pension,
0.8% of gross qualifying earnings is taken
from their net pay
In 2019/20, for a legal minimum
pension, 5% of gross qualifying earnings
will be taken from their gross pay
In 2019/20, for a legal minimum pension,
4% of gross qualifying earnings will be
taken from their net pay
Higher rate tax payers will get full tax
relief - no need for a tax code
adjustment or HMRC Self Assessment
Lower paid workers who do not earn
enough to pay tax, will still get 20% added
to their pension pot by HMRC
† Please note this does not apply
to Salary Sacrifice arrangements

Point of order!
Why is it acceptable for Government to
criticise payroll for getting net pay/RAS
wrong?
When HMRC can’t find a way to grant
hundreds of thousands of low-paid
workers their right to its pension
incentives?

Tax relief mechanisms used by pensions on our list †
Net Pay Arrangement (NPA) Relief At Source (RAS)
Workers Pension Trust True Potential Investments
AutoEnrolment.co.uk (Smart Pension) The People’s Pension1
Welplan Pensions NEST
The Creative Pension Trust Aviva Workplace Pension
Ascot Lloyd Pension Trust Standard Life Workplace Pension2
The BlueSky Pension Scheme
Corporate Pensions Trust
1 Relief at source is the default, but some employers may have chosen to use NPA instead.
2 Large employers may be using the trust based scheme, which uses NPA (the GPP uses RAS).
See: www.tpr.gov.uk/en/employers/duties-checker/outcomes/i-am-an-employer-who-has-to-provide-a-
pension/choose-a-pension-scheme-or-check-your-existing-one/what-to-look-for-in-a-pension-scheme.aspx
† Please note this does not apply
to Salary Sacrifice arrangements

Challenge!
Who’s heard of half these workplace
pensions?
I’m a little confused with this slide!
• What happened to NOW pensions?
• What about Legal and General?
• What about Royal London?
Oh and by the way, Blue Sky have changed their name to

Pension schemes
Master trust authorisation

DM 6452274 v1C These slides remain the property of The Pensions Regulator and their content should not be altered on reproduction.
The Pension Schemes Act 2017
• A Master Trust scheme will no longer be able to operate unless it is
authorised.
• It gives TPR the role of authoriser and supervisor of master trusts.
The policy objectives of the Pension Schemes Act 2017 are:
• to protect master trust members’ pension savings (including confidence in
savings) and address gaps in the regulatory regimes
• to ensure that TPR has the necessary powers to authorise and supervise
master trusts
• to ensure the market evolves in a balanced way
• to reduce the risk of fraud

Key changes
• Change in regulatory approach: from reactive regulation to proactive
authorisation and supervision.
• Minimum standards: to operate in the market, scheme must satisfy
minimum standards:
– Fitness and propriety of persons involved in the scheme;
– Sufficiency of financial resources;
– Scheme funder requirements
– Systems and processes used in running the scheme;
– Strategy to ensure a safe exit from the market and protect members.
• New procedures: for applications for authorisation, new supervisory
return, significant events, trigger event period.
• New powers: extended regulated community, authorisation, supervision
(inc exit), de-authorisation, pause, direction.

Implementation timetable

The potential outcomes
• Potential outcome for master trusts over the next year
 Successful authorisation
 Fail authorisation and exit
 Managed exit
• Market consolidation and consolidators
 A number of master trust have stated they will act in the consolidation of the
market, some proactively and others on a case by case basis
 The consolidation market has shown signs of slowing whilst those wishing
to remain concentrate on their own authorisation

Point of order!
We expect this assurance on master trust governance
This is a hygiene factor that should have been in place at outset
Why are we only getting round to this in 2018?

Automatic enrolment
2017 AE Review

FEB2018WEBINAR These slides remain the property of The Pensions Regulator and their content should not be altered on reproduction.
2017 AE review - key findings

FEB2018WEBINAR These slides remain the property of The Pensions Regulator and their content should not be altered on reproduction.
DWP 2017 review
• In 2016, average opt-out rate 9% (same as 2015) / average opt-in rate 5%.
• But many working-age people will not meet their retirement expectations,
particularly younger workers and those in low paid part-time jobs.
• Many people are now beginning to save, but for many reasons do not
actively engage with their pensions – so member engagement is important
(eg advertising / pensions dashboard).
Key proposals – beyond 2020 or 2021:
• Automatic enrolment threshold age to be lowered to 18 (from 22)
• The lower level of qualifying earnings will be set to £0:
– the “entitled worker” category will no longer apply - all workers aged 16 to
74 will be able to opt in to receive the employer’s contribution
(including part time workers / those who work for multiple employers)
– contributions based on banded qualifying earnings will start from £0.
• The self-employed will not be considered for automatic enrolment, as most
of them cannot be covered by the current design of automatic enrolment.

Challenge!
Bearing in mind the importance of some of those bullet
points…
Why is it taking Government
four years to do something
about it?

Any questions?

We are here to help!
Request a guest speaker:
https://secure.thepensionsregulator.gov.uk/speaker-
request.aspx
Contact us at:
www.tpr.gov.uk/contact-us.aspx
Subscribe to our news by email:
https://forms.thepensionsregulator.gov.uk/subscribe.aspx
Whistleblowing – how to contact us:
www.thepensionsregulator.gov.uk/whistleblowing-contact-
details.aspx
Thank you
The information we provide is for guidance only and should not
be taken as a definitive interpretation of the law.

Additional slides

Useful tools
• The ‘Duties checker’:
www.tpr.gov.uk/en/employers/duties-checker
• Planning: www.tpr.gov.uk/what-you-need-to-do-and-by-when.aspx
• Nominate a point of contact:
https://automation.thepensionsregulator.gov.uk/Nomination
• Find a letter code online:
https://automation.thepensionsregulator.gov.uk/LetterCode
• Tell us you are ‘not an employer’:
https://automation.thepensionsregulator.gov.uk/notanemployer
• Bulk declaration of compliance (file upload):
https://www.autoenrol.tpr.gov.uk/
• Work out pension contributions:
www.tpr.gov.uk/employers/employer-contributions.aspx

Useful links
• Frequently asked automatic enrolment questions:
www.tpr.gov.uk/automatic-enrolment-enquiries.aspx
• The essential guide to automatic enrolment:
www.tpr.gov.uk/docs/the-essential-guide-for-automatic-enrolment.pdf
• Our detailed guides for employers and pension professionals:
www.tpr.gov.uk/employers/detailed-guidance.aspx
• Information about declaration of compliance:
www.tpr.gov.uk/completing-the-declaration-of-compliance.aspx
• Letter templates for employers:
www.tpr.gov.uk/writing-to-your-clients-staff.aspx
• Event presentation:
www.tpr.gov.uk/doc-library/ae-presentations.aspx
• ONS article on a changing population 2017:
https://www.ons.gov.uk/peoplepopulationandcommunity/populationandmigratio
n/populationestimates/articles/overviewoftheukpopulation/july2017

An upate on auto-enrolment (tPR and Pension PlayPen)

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