Welcome Hampshire Association of Local Councils’ Workplace Pensions 21 st September 2015
Automatic Enrolment J ohn Le Poidevin M ember of the Pensions M anagement Institute’s Auto Enrolment Accredited CPD Programme Nationwide 646 holders of this examination
The Team • • 40 years in Financial Services PM I Certificates in Pensions Auto Enrolment John • • Director, IFA business 1990 to 2011 & Trustee Pensions Knowledge Le Poidevin • • Compliance Officer 1995 to 2011 tPR’s Trustee T oolkit Certificate • • Pensions Specialist 1987 to date PM I Automatic Enrolment Accredited • Auto Enrolment Consultant CPD Programme . • • 24 years in financial services Pensions and consultancy roles in Norwich Ian Batterbee • Independent Financial Adviser Union, Standard Life and Canada Life • • Contributor & development role - Dip Pfs Diploma in Financial Planning Annuity Direct • • 25 years in Accounting Services M ember of the Chartered Institute of Liam M cCann • 15 years in the Civil Service M anagement Accountants • • Payroll processes and procedures Business planning, budgeting and forecasting support for SM Es’ • • 42 years in Procurement Supplier/client/stakeholder relations skills Ian M iles • • Supply chain, procurement & CIPS • logistics Consultant CIOB • • Practiced in large-scale change ICM management
tax postpone Communications cost provision Qualifying Workplace Pension Scheme Schemes auto-enrolment Opt-out relax Staging Date Opt-in features Law flexibility Staff understanding money The Pensions Regulator use Pension fines value paid Non-eligible created choice safe secure employees certain normal tPR submissions Support Plans future government £ enrol assessment ways people leavers Staff ongoing QWPS receives Funding Planning additional pay categories changes people Pay-out
• Pensions Acts 2008 & 2011 • Pension Reform • Workplace Pensions • Automatic Enrolment
Does it affect my Council?
Auto enrolment A new law means that every employer must automatically enrol workers into a workplace pension scheme if they: • are aged between 22 and State Pension age • earn more than £10,000 a year • work in the UK This is called ‘automatic enrolment’.
It will not affect you if… … . • Y our Council employs fewer than one, (that is none) • All Local council workers are Self Employed contractors, • But… … … … … … . • In accordance with HM RC rules Clerks and RFOs to local councils cannot be engaged as Self Employed contractors
The Pension Problem • Ageing population • Prolonged period of low interest rates • Small employers less likely to provide pensions • Personal savings too small • Stakeholder Pension strategy failed
The Pension Solution • Have an Earnings Related State Pension? • Privatise secondary pension provision • Tell Employers how much to pay • Tell Employees how much to pay • Provide a purpose built scheme Then… … … … … … .
The Pension Solution M ake it unnecessarily complicated by giving choices • Allowing opt-outs after the event • Allowing Postponement, but employees can say “No, I want to join now” • Excluding many current schemes • Assess eligibility on earnings of £10,000pa • Then calculate contributions on £5,824+* * Capped at £42,385
What does this mean for local councils? • M ay need a qualifying pension scheme, or have a process in place for installing one in a timely manner • M ust issue statutory communications within prescribed timescales • M ust monitor workers on an ongoing basis for changes in age and earnings • M ust submit a Declaration of Compliance to the Pensions Regulator and keep appropriate records
What else must we do? Age M onthly gross earnings (2015/ 16) 16 – 21 22 – State Pension Age State Pension Age - 74 ENTITLED WORKER £486 and below (If they ask you to, you must provide a pension scheme for them, but you don’t have to pay contributions) NON ELIGIBLE J OB HOLDER Over £486 up to £833 (If they ask to be put into a pension scheme, you must put them in your qualifying pension scheme and pay regular contributions) ELIGIBLE J OBHOLDER NON ELIGIBLE J OB NON ELIGIBLE J OB (You must put these HOLDER HOLDER members of staff in (If they ask to be put (If they ask to be put your automatic into a pension scheme, into a pension scheme, enrolment pension Over £833 you must put them in you must put them in scheme and pay your qualifying pension your qualifying pension regular contributions. scheme and pay regular scheme and pay regular You don’t need to ask contributions) contributions) their permission)
Employer minimum Date Total minimum contribution contribution 2% 1% Before 30/ 09/ 2017 (including 1% staff contribution) 5% 01/ 10/ 2017 — 2% 30/ 09/ 2018 (including 3% staff contribution) 8% 01/ 10/ 2018 3% onwards (including 5% staff contribution)
Pay reference thresholds 2015 - 2016 Annual 1 week 1 month Lower level of qualifying £5,824 £112 £486 earnings Upper level of qualifying £42,385 £815 £3,532 earnings
How are we doing? 1. Why did we need pension reform 2. When commentators refer to the capacity crunch, what do they mean 3. We have a pension scheme so we don’t need to do anything. True or False? 4. What happens to employees when they reach State Pension Age? 5. I’ve heard there is an Opt Out so that is what we will do. Is that OK?
The Fines Extract from the Pensions Regulator Website The table below illustrates the escalating penalties that might be applied to employers for breaches of their automatic enrolment duties. Legislation Number of Prescribed daily breaches / non employees rate compliance will also invoke 1 - 4 £50 £400 Fixed 5 - 49 £500 Penalty 50 - 249 £2,500 where non compliance 250 - 499 £5,000 continues for each breach 500 + £10,000
Don’t Assume that… … … … Five common misconceptions that Local Councils must avoid ; 1. the chosen pension provider will do the work; 2. the payroll provider will tell you all you need to do; 3. the work will stop once staging has started; 4. all staff must have a pension 5. most people will opt-out anyway. Source: Employers that have completed Staging as reported in Payroll World, 13 th September 2013
Don’t Delay
Letter from DWP Are all eligible advising of Staging Date employees members? Employee Do you have a Yes Evaluate Staff decision Pension Scheme? No Yes No Opt-in Opt-out Is it a Do I need Eligible job holder to QWPS? help? contact Pension Administrator Have you communicated Can it be amended Yes No with your employees? to QWPS? Employee assessment required – essential for primary or Tier 1 Contribute enhanced protection Yes No on basic salary Tier 2 Contribute Have you on basic salary - assessed your Non- Pension Scheme Entitled >85% of records for Eligible Required? collective gross compliance? Employer Employer Employer to install a Qualifying Tier 3 Gross pay Optional Contribution Workplace Pension Scheme Contribution 3 Options available to Consider Postponement and Employers decide on Deferment Date Change Payroll Fully Compliant and inform all employees Evaluate Automatically Enrol all employees on Run Payroll No Change your Staging Date Have you Registered Evaluate Re-Run Payroll the scheme with the Evaluate TPR? Change No Change Send to Send to Pension File Payroll Pension Provider to Yes HM RC Provider send file of Opt-Out
The Pensions Regulator • Everything you need to know on-line • They know your Staging Date • They have RTI returns • They know what to expect, after all, • They have set the framework
What should you expect? • Every pension provider requires data in a different format • Every Payroll system provides it in a different format • Expect a cost for payroll to link to pension • Consider combining payroll and AE function
Watch out for… … … … … ... attempts to confuse you When; • Eligible means your employees are enrolled into your pension scheme without doing anything, the Automatic bit. • They may Opt Out , but only after you have done the work to put them in. • Non Eligible ? Ah! Well… … … … … … … … .
Watch out for… … .potential misinterpretation • Non Eligible means you are entitled to and eligible for a pension contribution from the council, but only if you ask to Opt In , in writing • Entitled means you are not eligible and, well, not really entitled to very much. • Entitled Workers may join the pension scheme, the council must deduct contributions from pay, it is not required to make an employer payment .
How are we doing? 1. How many employers have auto enrolled since 2012? 2. How many will auto enrol Jan to M ar 2016? 3. How many from now to Oct 2018? 4. Will it be more cost effective to call LGPS for auto enrolment? 5. “ I’m already drawing a pension, please don’t put me in another scheme”
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