Auto Enrolment How Does This Affect You ? Colin Walker Independent Financial Advisor
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
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?
Employers awareness of Automatic EnrolmentEmployers with no existing pension scheme: responses toAutomatic Enrolment - NESTAuto-Enrol into an Employer scheme:76% Unlikely8% Likely3% Highly UnlikelyAuto-Enrolment into NEST:66% Unlikely7% Likely18% Highly Unlikely9% UnsureSource: ACA survey of smaller firms views on Auto Enrolment And NEST 2011
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
Preparing for Automatic EnrolmentEmployer-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
When do I have to have my scheme in place? Employer Staging Dates Employer size Auto-enrolment staging datePAYE scheme size Staging date120,000 or more 1 October 201250,000-119,999 1 November 201230,000-49,999 1 January 201320,000-29,999 1 February 201310,000-19,999 1 March 20136,000-9,999 1 April 20134,100-5,999 1 May 20134,000-4,099 1 June 20133,000-3,999 1 July 20132,000-2,999 1 August 20131,250-1,999 1 September 2013800-1,249 1 October 2013500-799 1 November 2013350-499 1 January 2014250-349 1 February 201450-249 1 April 2014 to 1 April 2015Test tranche <30 Employees 1 April 2015 to 30 June 201530-49 Employees 1 August 2015 to 1 October 2015Less than 30 Employees 1 January 2016 t0 1 April 2017New Employers 1 May 2017 to 1 February 2018The rules for staging within each size grouping have still to beconfirmed.
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?
Who is eligible for Automatic Enrolment? Assessing and categorising the workforce 2012/2013 levels Qualifying Earnings Age < £5,564 £5,564 - £8,105 > £8,10516-21 Entitled Worker Non-eligible Non-eligible jobholder jobholder22-SPA Entitled Worker Non-eligible Eligible jobholder jobholderSPA-75 Entitled Worker Non-eligible Non-eligible jobholder jobholder
Contributions – phasing inBased 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 periodOctober 2012 October 2017 October 2018
Simplified Certification OptionsQualifying 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
Opting Out Opting out 1 month Opt Fill in Refund Inform RefundEngage Your Window out Notice Worker Provider Employer workforce Notice Review 1 month Opt out Fill in Refund Inform RefundEngage your Window Notice Notice worker Provider Employer WorkforceDefault ‘re-enrolment date’ is 3rd anniversary of Employer staging date every3 years.
Additional RequirementsAll Employers will have additional regulatoryrequirements∗Employers prohibited from incentivising opt outs∗Register with TPR to show they are meeting theirduties∗Payments will be monitored by Administrators orScheme Trustees who need to report failures∗Must keep records for 6 years∗Must retain Opt in & Opt Out notices for 4 years
EnforcementFines from the RegulatorStage 1 - A compliance/unpaid contribution noticeStage 2 - Fixed penalty of £400Stage 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
Employers – Who Deals With Auto Enrolment Issues?Number of Employees Pensions Dept/Human large Resources medium ? ‘Payroll’ small Organisation
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