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How Automatic Enrolment Affects Employers and Employees
- 1. Auto Enrolment How Does This Affect You ? Colin Walker Independent Financial Advisor
- 2. Today we will look at ∗ Employer Awareness ∗ What’s happening and when? ∗ Preparing for Automatic Enrolment ∗ When do I have to have my scheme in place? ∗ What makes a scheme qualifying? ∗ Who is eligible for Automatic Enrolment? ∗ Contributions – phasing In
- 3. Today we will look at ∗ Simplified Certification Options ∗ Opting Out ∗ Additional Requirements ∗ Enforcement ∗ Employers- who deals with Auto Enrolment Issues? ∗ Is there anything I can do to fund this more efficiently?
- 4. Employers awareness of Automatic Enrolment Employers with no existing pension scheme: responses to Automatic Enrolment - NEST Auto-Enrol into an Employer scheme: 76% Unlikely 8% Likely 3% Highly Unlikely Auto-Enrolment into NEST: 66% Unlikely 7% Likely 18% Highly Unlikely 9% Unsure Source: ACA survey of smaller firms views on Auto Enrolment And NEST 2011
- 5. What’s Happening And When? ∗ Auto Enrolment October 2012- September 2017 ∗ Staging date depends on employer size, but can be brought forward ∗ Employer must enrol eligible employees (job holders into qualifying Scheme) ∗ Provide information to all employees ∗ Eventually required to pay 3% of qualifying earnings (minimum 8% overall) ∗ Register with TPR and keep records ∗ 4-8 million new savers in workplace from 2012 ∗ Additional £10bn-15bn annual savings by 2050
- 6. Preparing for Automatic Enrolment Employer-no scheme Employer-with scheme ∗ Find out Staging Date ∗ Find out Staging Date ∗ Assess the workforce ∗ Assess the workforce ∗ Determine earning definitions ∗ Review/determine earnings ∗ Calculate costs definitions ∗ Consider scheme type ∗ Calculate Costs ∗ Communicate to workers ∗ Review existing Scheme ∗ Plan implementation ∗ Consider scheme type ∗ Enrol eligible job holders ∗ Communicate changes/terms to ∗ Register with TPR & keep workers records ∗ Plan implementation ∗ Contribute to workers ∗ Enrol eligible job holders pensions ∗ Register with TPR & keep records ∗ Contribute to workers pensions
- 7. When do I have to have my scheme in place? Employer Staging Dates Employer size Auto-enrolment staging date PAYE scheme size Staging date 120,000 or more 1 October 2012 50,000-119,999 1 November 2012 30,000-49,999 1 January 2013 20,000-29,999 1 February 2013 10,000-19,999 1 March 2013 6,000-9,999 1 April 2013 4,100-5,999 1 May 2013 4,000-4,099 1 June 2013 3,000-3,999 1 July 2013 2,000-2,999 1 August 2013 1,250-1,999 1 September 2013 800-1,249 1 October 2013 500-799 1 November 2013 350-499 1 January 2014 250-349 1 February 2014 50-249 1 April 2014 to 1 April 2015 Test tranche <30 Employees 1 April 2015 to 30 June 2015 30-49 Employees 1 August 2015 to 1 October 2015 Less than 30 Employees 1 January 2016 t0 1 April 2017 New Employers 1 May 2017 to 1 February 2018 The rules for staging within each size grouping have still to be confirmed.
- 8. What makes a scheme qualifying ∗ Does it permit Automatic Enrolment? ∗ Are employees enrolled automatically within 3 months of joining? ∗ Does the scheme have a “default” investment option? ∗ Recognising the likely characteristics & needs of employees ∗ Appropriate balance between risk & return ∗ Glide path to safer assets as retirement approaches ∗ Does it meet one of the minimum contribution tests? ∗ Does it have an opting out facility?
- 9. Who is eligible for Automatic Enrolment? Assessing and categorising the workforce 2012/2013 levels Qualifying Earnings Age < £5,564 £5,564 - £8,105 > £8,105 16-21 Entitled Worker Non-eligible Non-eligible jobholder jobholder 22-SPA Entitled Worker Non-eligible Eligible jobholder jobholder SPA-75 Entitled Worker Non-eligible Non-eligible jobholder jobholder
- 10. Contributions – phasing in Based on Qualifying Band Earnings Steady State Defined contribution 1% employee 3% employee 5% employee contribution contribution contribution Defined contribution 1% employer 2% employer 3% employer contribution contribution contribution Staging period October 2012 October 2017 October 2018
- 11. Simplified Certification Options Qualifying Earnings Definition (2012/13) – P60 income from £5,564 to £42,475 Employer minimum Minimum total Full basic salary (pensionable pay) 4% 9% Full basic salary, and at least 85% of 3% 8% total pay is pensionable Total earnings (p60) 3% 7% Employer industry & demographic will drive decisions
- 12. Opting Out Opting out 1 month Opt Fill in Refund Inform Refund Engage Your Window out Notice Worker Provider Employer workforce Notice Review 1 month Opt out Fill in Refund Inform Refund Engage your Window Notice Notice worker Provider Employer Workforce Default ‘re-enrolment date’ is 3rd anniversary of Employer staging date every 3 years.
- 13. Additional Requirements All Employers will have additional regulatory requirements ∗Employers prohibited from incentivising opt outs ∗Register with TPR to show they are meeting their duties ∗Payments will be monitored by Administrators or Scheme Trustees who need to report failures ∗Must keep records for 6 years ∗Must retain Opt in & Opt Out notices for 4 years
- 14. Enforcement Fines from the Regulator Stage 1 - A compliance/unpaid contribution notice Stage 2 - Fixed penalty of £400 Stage 3 – Escalating daily penalties Number of Persons Prescribed daily rate 1-4 £50 5-49 £500 50-249 £2,500 240-499 £5,000 500+ £10,000
- 15. Employers – Who Deals With Auto Enrolment Issues? Number of Employees Pensions Dept/Human large Resources medium ? ‘Payroll’ small Organisation
- 16. Is there anything I can do to fund this more efficiently? “…the overarching view is that salary sacrifice is here to stay, and will prove to be a valuable tool for advisers looking to manage the transition to auto enrolment.” Source: Corporate Adviser – September 2010
- 17. Questions