Pensions Regulator - automatic enrolment for accountants

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ACCA – Accountex - 2017
Jeremy Leslie-Smith & Stephen Rowntree
Industry liaison manager
10th
& 11th
May 2017
Automatic enrolment
Overview and future
developments
The information we provide is for guidance only and
should not be taken as a definitive interpretation of the law.

DM 3075434 These slides remain the property of The Pensions Regulator and their content should not be altered on reproduction.
Topics
• An overview of progress to date and future developments
• Compliance and enforcement update
• Questions

DM 2750193 v7W These slides remain the property of The Pensions Regulator and their content should not be altered on reproduction.
Automatic enrolment legislation gives employers a duty to:
 automatically enrol all staff who are eligible (‘eligible jobholders’)
 other staff who have the right to ask to opt in or join a pension
 communicate to their staff
 manage opt outs and promptly refund contributions
 every three years, automatically re-enrol staff who are eligible
 complete a declaration of compliance with the regulator
 keep records
 maintain payments of pension contributions
The employee safeguards mean that employers:
 must not induce staff to opt out or cease membership of a pension, and
 must not indicate, when recruiting new staff, that the decision to employ
them will be influenced by whether or not they intend to opt out.
Overview of legal duties and safeguards

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What’s happened so far …
• As at the end of April 2017
• 540,919 employers have
completed their declaration of compliance,
• covering 25m workers, of which:
• 10m (40%) were already in a qualifying scheme;
• 7.8m people (31%) were automatically enrolled;
• 433k (2%) workers had the transitional period applied;
• and 6.8m (27%) were ‘none of the above’.
• 12,573 employers have completed a re-declaration of compliance
• 414,000 workers have been re-enrolled
Employers declaring
since Jan 2015

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Quarterly forecast of employers due to comply with AE
We estimate that up to 750,000
employers are due to start their AE
duties in 2017

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Under the AE legislation, these changes come into effect during 2017 / 2018:
The end of DB transitional arrangement
• From 1 October 2017, any employers who have applied the transitional period
for pension schemes with defined benefits to any of their staff will need to put
them into a DB automatic enrolment pension scheme. See website for details:
www.tpr.gov.uk/end-of-transitional-period-for-pension-schemes-with-defined-benefits.aspx
End of staged employers
• This financial year, we will see the largest ever volumes of employers starting
their duties (800,000) and will reach the end of the pre-determined staging
dates in February 2018.
Contribution rate increases (‘Phasing’)
• This is the increase in the statutory minimums for employers’ and employees’
contributions due in April 2018 and again in April 2019, reaching a total
minimum contribution of 8%.
Pre-determined AE changes in 2017/18 - i

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Staging dates for new employers (post 1 April 2012)
Employers with no PAYE Staging date
From 1 April 2012 up to and including 1 April 2017 1 April 2017
PAYE income is first payable in respect of any worker Staging date
From 1 April 2012 up to and including 31 March 2013 1 May 2017
From 1 April 2013 up to and including 31 March 2014 1 July 2017
From 1 April 2014 up to and including 31 March 2015 1 August 2017
From 1 April 2015 up to and including 31 December 2015 1 October 2017
From 1 January 2016 up to and including 30 September 2016 1 November 2017
From 1 October 2016 up to and including 30 June 2017 1 January 2018
From 1 July 2017 up to and including 30 September 2017 1 February 2018

• Employers with no PAYE who become an employer from 2 April 2017
onwards, do not have a pre-determined date for their duty start date.
– their duty start date is the contracted start date of their first worker.
• Postponement can be used in the normal way (ie up to 3 months).
• New employers with no PAYE do not need to make a declaration of
compliance until we ask them to, although they can if they wish
(by contacting our Help Desk to get a Letter Code).
• We will write to the employer with further details of what they'll need to do
and by when.
New employers with no PAYE from 2 April 2017

• Employers who become an employer from 1 October 2017 onwards, do
not have a pre-determined date for their duty start (ie staging) date.
– their duty start date is the contracted start date of their first worker.
• Postponement can be used in the normal way (ie up to 3 months).
• Employers using a PAYE will have to complete a declaration of compliance
within five months of their duty start date.
• As before, new employers with no PAYE do not need to make a declaration
of compliance until we ask them to, although they can if they wish
(by contacting our Help Desk to get a Letter Code).
• We will write to the employer with further details of what they'll need to do
and by when.
• See www.tpr.gov.uk/checking-your-clients-staging-date.aspx
All new employers from 1 October 2017 onwards

Who is included in the automatic enrolment duty?

Who is excluded?
Certain people are exempted from the AE duties, including:
• directors not working under an employment contract;
• a director who is working under an employment contract, where
they are the only employee in the company - but only for the work
they carry out for that company;
• office-holders who are not considered workers (eg non-executive
directors, trustees, elected members) - but they are only excluded
for the activities they carry out as an office holder;
• the (truly) self-employed.
* See additional slides on “Exceptions” for more details

Employer option not to enrol
Employers may choose whether or not to automatically enrol or re-enrol
certain people*, if they trigger automatic enrolment, including:
•directors working under an employment contract;
• LLP partners who are not ‘salaried members’ under HMRC tax rules;
•people who are in their notice period;
•individuals who ceased active membership of a qualifying pension in the
previous 12 months;
•those with HMRC tax protected status for their pension savings.
Only the enrolment duty is optional, all other duties remain unchanged.
The individuals retain the right to ask to join or opt-in (except people
working their notice), in which case the employer is obliged to enrol them.
Even if the employer is able to choose not to enrol all of their staff:
•the employer still has to send the normal statutory letters/emails
•and make a declaration of compliance, at the usual time.
* See additional slides on “Exceptions” for more details
?

To tell us you are not an employer
• If an employer does not believe they are an employer because:
– it is a sole director company, with no other staff
– it is a company with more than one director, where no more than one
director has an employment contract (and there are no other staff)
– the company has ceased trading
– the company has gone into liquidation or has been dissolved
– they no longer employ people in their home (eg cleaners, nannies,
personal care assistants)
Tell us at
 https://automation.thepensionsregulator.gov.uk/notanemployer
• The tool is not for employers who:
– have no staff to enrol on their staging date, or
– for companies in administration or in non-terminal insolvency

Qualifying earnings
Age range
16-21 22-SPA* SPA*-74
* SPA = State Pension Age
** Figures for 2017/18
Eligible
jobholder
Employer must
automatically enrol
eligible jobholders into an
automatic enrolment
pension scheme
Worker categories
Non-eligible jobholder
Non-eligible
jobholder
Non-eligible
jobholders can
opt in to an
automatic
enrolment pension
scheme
Entitled worker
Can request to
join a pension
scheme
Non-eligible
jobholder
More than £10,000** pa
Over £5,876 pa
and up to £10,000** pa
Up to £5,876** pa

AE earnings triggers 2017-18†
Pay Reference
Period/Cycle
Earnings trigger for
automatic
enrolment
Annual £10,000 pa
Bi-annual £4,998.00
1 quarter £2,499.00
1 month £833.00
4 weeks £768.00
Fortnight £384.00
1 week £192.00
†
For other Pay Reference Period (PRP) durations, multiply the number of weeks in the PRP by the weekly amount
(eg £192.00) or number of months by the monthly amount (eg £833.00) etc - or pro-rata if not an exact multiple of any of the
above.
The Secretary of State will review these figures each tax year.

Assessing your staff
• Employers will need to assess all their staff on their staging date
– unless they choose to use ‘postponement’ (described in later slides).
• Their qualifying earnings must be used to assess their category
(ie eligible jobholder, non-eligible jobholder or entitled worker).
• Qualifying earnings is any component of pay that could be considered one of
these pay elements (an employer should use their reasonable judgement):
– salary/wages, commission, bonuses, overtime and some statutory
payments (excluding expenses and dividends).
• Eligible jobholders must be automatically enrolled into a suitable scheme
– unless they are already an active member of a ‘qualifying’ pension scheme
with that employer.
• After the staging date, employers will have to:
– assess all new staff who join them
– assess some staff every pay period (see slide on ‘Monitoring eligibility’)
– assess some staff again every three years (see slide on ‘Re-enrolment’).

Postponement
• Postponement delays the duty of automatic enrolment and the need to assess
and can be used:
– at the employer’s staging date for any or all existing staff
– on the first day of employment for any new joiner after the staging date, and
– on the date a member of staff meets the criteria to be an eligible jobholder.
• Only one postponement per member of staff can be made at a given time.
• Each worker can be postponed from one day up to maximum of three months.
• The employer must notify any postponed member of staff within six weeks
and a day of the start of postponement.
• The member of staff has the right to opt in or join during postponement.
• Employer must assess on the last day of postponement and:
– automatically enrol eligible jobholders, and
– for those staff not eligible, monitor them each future pay period.
Postponement does not change or
delay the staging date or declaration
of compliance deadline

Min DC
8% total*
Min DC
5% total*
Minimum DC 2% total contribution*
DC scheme minimum contributions
April 6th
2019
April 6th
2018
Min DC 2%
employer*
Min DC 3%
employer*
Phase 1 Phase 2 Phase 3
Oct 2012 May 2017April 2014 June 2015
Large
employers
Medium
employers
Small/micro
employers
New
employers
Feb 2018
*% of banded
qualifying earnings

What pension schemes can be used?
 must be registered in the UK or EEA*
 must have no barrier to automatic enrolment
 must be a qualifying scheme
Automatic enrolment scheme
Qualifying scheme
 must be tax registered:
 and meet minimum criteria
Workers already
active members of a
qualifying scheme do
not need to be
automatically enrolled
Must be used
for automatic
enrolment
and ‘opt ins’
Employers will
need to contribute
to the pension
scheme
*European Economic Area states
Employers may also
use a qualifying scheme
or an automatic
enrolment scheme for
entitled workers
Scheme for
entitled
workers
 scheme
is registered
Employers are not
required to make an
employer contribution

Can clients use an existing pension scheme?
If clients have an existing scheme, it may not be suitable for automatic
enrolment.
1.To be a qualifying scheme:
– the contributions due must be at or above the minimum criteria
– if it is a personal or GPP contract-based scheme, it is likely to need a
jobholder agreement for each active member.
If it is not a qualifying scheme, it may be possible to change the scheme
rules to make it qualifying.
Active members of a pension which is not qualifying would need to be
assessed and, if eligible, automatically enrolled into another pension.
•If they want to use a qualifying scheme to automatically enrol their workers:
– the pension must have no barrier to automatic enrolment (eg default fund).
The existing pension provider may not allow it to be made a qualifying scheme or
an automatic enrolment scheme - check with the pension provider.

Tax relief: two mechanisms
• 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
– Relief at Source (‘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

Declaration of compliance
• After staging, employers must complete a declaration of compliance
– and it must be completed within five months of the staging date and
– within five months of the 3rd anniversary of the staging date (or previous
automatic re-enrolment date)
• Employers may receive a penalty fine if they do not complete their declaration
on time.
• Employers will need to provide certain details, for example:
– which pension schemes were used to comply with the duties,
– (after cyclical re-enrolment only) their chosen automatic re-enrolment date,
– the number of eligible jobholders automatically enrolled into each scheme.
• All postponements applied at the staging date must have come to an end
before the declaration can be completed.
• You can start the online process early and partially complete your declaration.

Industry liaison team
25th
April 2017
Automatic enrolment
Compliance and enforcement
The information we provide is for guidance only and
should not be taken as a definitive interpretation of the law.

Our statutory objective for automatic enrolment is to:
• maximise employer compliance with the AE employer duties
Our approach is to:
• Educate, Enable and then Enforce
and we are risk based and proportionate.
We may start with informal action (eg instructions or preventative action) for
minor breaches.
We have statutory powers to gather information and can issue statutory
notices and/or penalties (fixed penalty notices £400 or escalating penalty
notices of up to £10,000 per day).
Ultimately, we can use our powers to prosecute under criminal law (including
the Proceeds of Crime Act 2002) and/or can carry out Civil debt
recovery – and we collaborate and share intelligence with other
enforcement agencies.
The Regulator’s role

DM2777032 v10B 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
December 2016):
– 211 information notices
– 57 statutory inspection notices
– 31,680 compliance notices
– 1,107 unpaid contribution notices
– 9,831 fixed penalty notices
– 1,477 escalating penalty notices
Use of powers
33,180 cases closed by
31 December 2016

 An increasing number of people are appealing their fines at Tribunal and yet
just one person so far has been successful (164 requests to 31 December
2016).
 Employers who receive a statutory notice and disagree with our decision to
issue it must first ask us for a review (5,351 to 31 December 2016).
 If they disagree with the outcome of that review they can then appeal the
decision to the Tribunal Service.
 Employers have 28 days after the review decision is issued in which to
appeal.
The Tribunal will focus on whether the employer has a reasonable excuse for
not complying with the compliance notice. Poor excuses include:
– the online system is too difficult to use
– no reminder was received
– the member of staff in charge of AE or the employer was ill
– a mistake was made
Tribunals

• Employers receive County Court orders to pay their automatic enrolment fines
– the order may be registered as a County Court Judgment - it would then
affect their credit record and potentially their ability to get a mortgage,
credit card or even a bank account in the future (it remains on the register
for 6 years).
• Pubs, clubs and restaurants are at a higher risk of non-compliance with:
– a larger than average numbers of temporary workers
– a higher level of English as a second language, and
– many employees on non-standard contracts
 there’s information on our website on how to assess and enrol people who
work varying hours:
• www.tpr.gov.uk/fluctuating
 and staff letter templates are now available in some other languages:
• www.tpr.gov.uk/doc-library/automatic-enrolment-letter-templates.aspx
County Court Judgements

TPR’s approach is an employer:
• should take reasonable steps to put the worker back in the position they would
have been in if the breach had not occurred, and
• should not profit from their mistake.
So, if an employer fails to enrol a worker from their staging date they should:
• enrol them, backdated to the original date, and
• ensure backdated pension contributions are paid.
• give the employee the option to pay their backdated contributions (over a
reasonable timeframe).
If the employer has not completed the actions and remedies required by our
compliance notice within 3 months of the specified deadline, TPR has the power
to:
• require the employer to pay both their own and employee contributions, and
• require interest to be added to outstanding contributions.
What if an employer makes a mistake?

Our approach:
• To educate and enable employers to help them comply.
• We want employers to contact us if they are experiencing difficulties.
If an employer chooses to ignore their duties - this is unacceptable and statutory
notices, £400 fixed penalty fines and escalating penalties can be issued for
non-compliance, including:
• failing to complete a declaration of compliance.
We recommend employers (or their advisors) should:
• not leave it to the last moment - thousands of employers may be in the queue!
• 6 months before staging, start planning to get a pension provider in place (if
they have eligible workers)
• ensure software is fit for purpose (eg can send data to pension provider)
• cleanse employee data and test the payroll / AE software, preferably before
staging.
Summary

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
For a full list of all our research and analysis:
www.tpr.gov.uk/doc-library/research-analysis.aspx
Thank you
The information we provide is for guidance only and should not
be taken as a definitive interpretation of the law.

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
• Find an employer’s staging date:
www.tpr.gov.uk/employers/tools/staging-date.aspx
• Bring a staging date forward: www.autoenrol.tpr.gov.uk

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/pensions-reform/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
• To register for the automatic enrolment (‘3 coins’) logo - under
registration, choose “I require pension automatic enrolment files”
https://communicationcentre.dwp.gov.uk/dwp/index.php
• Event presentations:
www.tpr.gov.uk/doc-library/ae-presentations.aspx

DM 2750193 v7Y These slides remain the property of The Pensions Regulator and their content should not be altered on reproduction.
Additional slides

The employer failed to complete their declaration or respond to the
compliance notice giving them 28 days to comply and was fined £400
They asked us to review the decision as they had delegated it to a junior
member of staff and thought it had been completed.
We responded this was not a reasonable excuse for failing to comply with
their legal duties.
The employer then appealed the decision to the Tribunal.
The judge confirmed that we were right to issue the fine, the fact that a
junior member of staff had failed to do this on the employer’s behalf did not
amount to a reasonable excuse.
•The employer was informed of its duties and should not delegate them
without checking that they had been performed.
Case study i - small independent garage

We began County Court proceedings against an employer in the
licensed restaurant sector who had not paid their £400 fixed penalty fine
They went on to complete their declaration of compliance, but did not pay
the fine ...
... even after sending a number of reminders and giving them time to pay.
So we made an application to the County Court to enforce the penalty ...
... they paid before the court made an order, but still had to pay court fees.
•We have the power to take an employer to court to recover the debt if they
fail to pay the original fine.
Case study ii - County Court proceedings

Swindon Town Football Company Ltd (STFC) was the first employer to
be issued an Escalating Penalty Notice.
The employer failed to complete their declaration of compliance and failed to
put eligible staff into a scheme, pay contributions or write to staff explaining
how automatic enrolment affected them.
We gave guidance to STFC on how they could comply with their duties within
certain timescales. A fixed penalty notice of £400 was issued and they
continued to fail to comply and daily escalating fines of £2,500 were imposed
totalling £22,500 They also had to pay £13,613.39 in outstanding pension
contributions.
Employers should not ignore their duties. TPR will work with you to help you
comply, but we will use our powers where appropriate. Deliberate non-
compliance will not be tolerated.
If you have received a fine, you will still have to pay it even if you then go on
to become compliant.
www.tpr.gov.uk/regulate-and-enforce/section-89-reports.aspx
Case study iii - Swindon Town Football Club fined £22,500

Which workers should be considered?
• It is not just employees who come under automatic enrolment (AE). Even
someone considered self-employed may not be excluded from the AE duties.
• If a “personal” contract for work or services exists and the individual is not
providing the work as part of their own business, then they would be considered
a worker.
• Fixed term, ‘casual’ or non-permanent workers should be assessed under the
same criteria as other workers.
• Zero hours contract workers are a category of worker employers will need to
consider as part of their employer duties.
Postponement gives employers flexibility (eg for short-term workers)
• but workers must be issued a postponement notice, within six weeks and a day
from the start of postponement, or postponement cannot be used; and
• the staging date and declaration of compliance deadline remain unchanged.
Compliance issues among employers - i

Opting-in and out
• All eligible jobholders must be automatically enrolled before they can exercise
their right to opt-out.
• Employers must take immediate steps to establish the worker’s enrolment
date, upon receipt of a valid Opt-in notice, as they may need to start taking
deductions from the next pay day.
Reassessing eligibility
• Employers must assess workers, who have not previously been eligible, at
each pay reference period to see if the eligibility criteria is triggered.
• Those who have already been automatically enrolled once - or have been an
active member of a pension scheme - and have then opted out or ceased
membership, should be left until re-enrolment.
• Staff who earn less than £10,000 a year, will still need to be automatically
enrolled if they earn over the threshold for their pay reference period - for
example, over £192 for weekly or over £833 for monthly paid workers.
Compliance issues among employers - ii

TPR compliance and enforcement teams have recently been visiting employers to
conduct inspections - and found these examples of non-compliance:
•An adviser developed their ‘own’ Opt Out notices and provided these to an employer
who was a client. The client handed the unofficial forms to workers. All workers then
‘opted out’ of the scheme using this unofficial form (this was not a valid opt out). The
adviser then opted out all the workers from the scheme, as they were a delegate on
the pension provider system for the employer. So, no Opt Outs were processed in
person by the workers on the pension provider systems.
•An adviser provided an employer client with an opt-out form from a completely
different pension provider and opt outs were again subsequently facilitated by the
adviser (not in person by the workers themselves).
•An adviser advised a person that they needed to AE themselves as a single person
director company (this was not necessary as they are exempt).
•Advisers were incorrectly declaring organisations as ‘not employers’, when they do
actually meet the ‘employer’ definition and so do have AE duties.
TPR inspections

Bringing forward staging dates
• For an employer with no one to automatically enrol:
– there is no need to have a pension scheme in place
– they can bring forward their staging date to any date (not just the 1st
of the month).
• Employers who do have workers to automatically enrol must:
– get consent from their pension provider to use the chosen pension
scheme from the earlier staging date;
– AND can only choose a date which is a current standard staging
date (so must be on the 1st
of the month, but cannot be on 1 June
2017, 1 September 2017 or 1December 2017).
• An employer must inform us that they want to change their staging
date, and must do so on, or before, their new staging date.
• Once an employer’s staging date has been brought forward, it
cannot be changed back – we have no power to do this.

Bringing forward staging dates on our online portal
Make sure you click on the
“Next: Declaration” button and
go on to the next screen to
declare that you definitely
want to bring the staging date
forward (this is NOT a
declaration of compliance)

DM 2777032 v10B These slides remain the property of The Pensions Regulator and their content should not be altered on reproduction.
Johnsons Shoes Company turned a £400 fine into a bill for more than
£40,000 after claiming it was too busy to meet its pension responsibilities.
They were issued with a £400 fixed penalty notice after they failed to comply with
the law on the automatic enrolment.
The company was required to check whether its staff were eligible to be put into
a workplace pension scheme and to confirm to TPR that it had done so.
Johnsons paid the £400 fine, but still did not become compliant. Despite
repeated reminders - and being warned that it would face a new fine that would
increase by £2,500 per day if it did not comply.
The new fine reached £40,000 before the company finally became compliant (16
days). At that point, Johnsons refused to pay the fine - forcing TPR to take the
business to court to secure payment.
Eventually, Johnsons agreed to pay the £40,000 fine and £2,000 court costs,
preventing the need for a full court hearing on the matter.
www.tpr.gov.uk/press/pn17-20.aspx
Case study - shoe firm left to foot £42,400 bill

Pensions Regulator - automatic enrolment for accountants

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