• Formal report written What’s next and presented to Ministers • Implementation starts in July www.oscr.org.uk
Thank you …. Any questions? www.oscr.org.uk
Questions? www.oscr.org.uk
www.oscr.org.uk
Automatic enrolment An Introduction Meet the Charity Regulator Scottish Charity Regulator Neil Wilson Industry liaison manager Tuesday 17 May 2016 The information we provide is for guidance only and should not be taken as a definitive interpretation of the law. DM 2750193 v7C These slides remain the property of The Pensions Regulator and their content should not be altered on reproduction.
Topics • Why is automatic enrolment being introduced? • What employers need to do • Staging dates and overall timetable • Who is subject to the automatic enrolment duties? • Worker categories and the duties and rights for pension scheme enrolment • Qualifying earnings and the automatic enrolment processes • Postponement • Monitoring worker status and re-enrolment • Pension schemes and pensionable earnings • Opt ins and opt outs • Communicating with workers • Keeping records • Re-enrolment • Declaration of compliance DM 2750193 v7C These slides remain the property of The Pensions Regulator and their content should not be altered on reproduction.
Why is automatic enrolment being introduced? There are currently four people of 7 million working age for every pensioner people are by 2050 there will be just two. under-saving Past and predicted trends in the life expectancy period of 65 year old men and women in the UK as of 2004 and 2010 DM 2750193 v7C These slides remain the property of The Pensions Regulator and their content should not be altered on reproduction.
Overview of legal duties and safeguards 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. DM 2750193 v7C These slides remain the property of The Pensions Regulator and their content should not be altered on reproduction.
Customising the steps for different employers DM 2750193 v7C These slides remain the property of The Pensions Regulator and their content should not be altered on reproduction.
Staging • The employer duties apply to each employer from their staging date: – the duties apply to all of the employer’s workers from that date. An employer’s staging date will be based on the PAYE scheme or • schemes that were being used on 1 April 2012. Do not assume – After 1 April 2012, any change to the PAYE schemes your clients know their being used will have no effect on the staging date. staging date - check this on • However, new employers* will go last, from May 2017. our website *Employers that did not exist Large Medium Small/micro New * employers (or were not using a PAYE) employers employers employers as at 1 April 2012. Oct 2012 June 2015 May 2017 Feb 2018 April 2014 DM 2750193 v7C These slides remain the property of The Pensions Regulator and their content should not be altered on reproduction.
Staging dates for new employers (post 1 April 2012) 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 DM 2750193 v7C These slides remain the property of The Pensions Regulator and their content should not be altered on reproduction.
Staging profile (excludes those without eligible jobholders and employers with no workers) Very large volumes staging from January 2016 We estimate* that up to a million employers yet to stage will have full automatic enrolment duties * Based on age and earnings data from HMRC DM 2750193 v7C These slides remain the property of The Pensions Regulator and their content should not be altered on reproduction.
Who is included in the automatic enrolment duty? A person may be subject to the automatic enrolment legislation if they are: • aged 16 to 74 (inclusive), and • work in the UK * ... ... whether or not they are full time or part time, permanent or temporary. There may also be other people who are included: • overseas workers, who are considered ordinarily working in the UK * . However, the truly self employed are not subject to automatic enrolment. * the Channel Isles and the Isle of Man are outside the UK DM 2750193 v7C These slides remain the property of The Pensions Regulator and their content should not be altered on reproduction.
Who is excluded? Exclusions from automatic enrolment duties include: • directors not working under an employment contract; • 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 ; • a company with only one employee , if that employee is also a director of that company (but only for the work they carry out for that company). However, employers may choose whether or not to automatically enrol certain people who trigger automatic enrolment, including individuals* who: • are directors working under an employment contract (from 6 April 2016); • are LLP partners , but are not ‘salaried members’ under HMRC tax rules (duties continue to apply in full to ‘salaried members’); • are in their notice period ; • have previously ceased active membership of a qualifying pension; • have HMRC tax protected status for their pension savings; • have received a pension winding-up lump sum payment. * See additional slides on “Exceptions” for more details DM 2750193 v7C These slides remain the property of The Pensions Regulator and their content should not be altered on reproduction.
Is your client considered the ‘employer’? Where someone: • is employed by your client (ie they have a contract of employment with your client), or • is directly contracted to perform work for your client and your client pays the individual: then your client is considered to be the ‘employer ’ (ie the ‘employer’ is the legal entity named in the contract). Otherwise : • if someone working for your client is employed by another company (perhaps because they work for an agency or their own limited company), your client will not be considered the employer and so will have no AE duties for them. • if someone working for your client is paid for this work by another company or agency, that company will have the responsibility for any automatic enrolment duties, not your client. DM 2750193 v7C These slides remain the property of The Pensions Regulator and their content should not be altered on reproduction.
What if someone says they are self-employed? • If someone working for your client says they are self-employed, your client should not assume that this person is exempt from automatic enrolment … unless they are a director of your client’s company, as a director who is not working under an employment contract is exempt. • Otherwise, your client should consider if the contract allows the individual to subcontract the work or freely substitute somebody else to do it … if so, then your client will not have any automatic enrolment duties for the individual. • However, if the individual (who is not director of that company) is normally expected to do the work themselves (unless they are unable to do it themselves, eg they are on holiday or sick) … then they are considered to have a ‘personal contract’ to perform work or services and the employer will need to judge whether or not the individual is doing the work as part of their own business. DM 2750193 v7C These slides remain the property of The Pensions Regulator and their content should not be altered on reproduction.
Is someone working as part of their own business? If someone (who is not a director) considers themselves self-employed and has a ‘personal contract’ : • The employer will need to consider whether the individual is working as part of their own business or not. • There are a number of factors that will help decide this. Does the employer: – have control of the hours they work? – provide any employee benefits? – bear all the significant financial risks in carrying out the work (eg the worker is not financially responsible for their faulty work)? – consider the individual to be part of their own organisation? – provide what is required for the individual to carry out the work (eg tools)? If most or all of the above are true, it would be reasonable to consider that the individual is not undertaking the work as part of their own business and so are subject to automatic enrolment. • Otherwise, they are truly self-employed and are exempt. DM 2750193 v7C These slides remain the property of The Pensions Regulator and their content should not be altered on reproduction.
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 – the company has ceased trading – the company has gone into liquidation or has been dissolved 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 DM 2750193 v7C These slides remain the property of The Pensions Regulator and their content should not be altered on reproduction.
Worker categories Age range Qualifying earnings 16-21 22-SPA* SPA*-74 Non-eligible Under £5,668 † pa Up to £5,824** pa jobholders can Entitled worker opt in to an Can request to automatic enrolment join a pension pension scheme scheme Non-Non-Eligible Jobholder Between £5,668 pa Over £5,824 pa Non-eligible jobholder Non-Eligible Jobholder and up to £9,440 † pa and up to £10,000** pa -Eligible Jobholder Eligible Jobholder Eligible Non-Eligible Non-eligible Non-eligible More than £9,440 † pa More than £10,000** pa jobholder Jobholder jobholder jobholder Employer must * SPA = State Pension Age automatically enrol eligible jobholders into an ** Figures for 2016/17 automatic enrolment pension scheme DM 2750193 v7C These slides remain the property of The Pensions Regulator and their content should not be altered on reproduction.
AE earnings trigger v Pay Reference Periods 2016-17 † Pay Reference Earnings trigger for Period/Cycle 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. DM 2750193 v7C These slides remain the property of The Pensions Regulator and their content should not be altered on reproduction.
Are joiners entitled to an employer contribution? 2016-17 Pay Reference Those earning this Earnings trigger for Period/Cycle or less not entitled automatic to an employer enrolment contribution Annual £5,824 pa £10,000 pa Bi-annual £2,912.00 £4,998.00 1 quarter £1,456.00 £2,499.00 1 month £486.00 £833.00 4 weeks £448.00 £768.00 Fortnight £224.00 £384.00 1 week £112.00 £192.00 N.B. The Secretary of State will review these figures each tax year. DM 2750193 v7C These slides remain the property of The Pensions Regulator and their content should not be altered on reproduction.
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 – but any active member of a ‘qualifying’ pension scheme with that employer will not need to be automatically enrolled. • 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’). DM 2750193 v7C These slides remain the property of The Pensions Regulator and their content should not be altered on reproduction.
Postponement does Postponement not change or delay the staging date • Postponement suspends 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. DM 2750193 v7C These slides remain the property of The Pensions Regulator and their content should not be altered on reproduction.
Monitoring eligibility for automatic enrolment • After the staging date, employers will have to assess, every pay period, any worker who: i. is not an active member of a qualifying pension scheme, and ii. is not under postponement or the transitional period, and iii. has not previously been automatically enrolled (or assessed as an eligible jobholder whilst an active member of a qualifying scheme Ϯ ). • Workers assessed as an eligible jobholder would then need to be automatically enrolled (or postponed). • Those workers that do not fall into the above category should be left until the next cyclical re-enrolment date (see slide on cyclical re-enrolment). Ϯ A worker who has simultaneously been an eligible jobholder and an active member of a qualifying scheme since the later of: • the employer’s staging date; or • the date they started work for the employer; or • the last day of postponement. DM 2750193 v7C These slides remain the property of The Pensions Regulator and their content should not be altered on reproduction.
Check suitability of payroll and IT systems • Payroll software can help a client carry out: – the assessment – enrolment – communications, and – calculation of pension contributions If their payroll software does not do all of the above, non-payroll software or services could be used. • Some pension scheme providers offer some or all of these services. • Clients should plan to test these systems before they go live. • Employers have often found many errors in their staff records - so these should be checked for accuracy before staging. DM 2750193 v7C These slides remain the property of The Pensions Regulator and their content should not be altered on reproduction.
Choosing a pension • The employer must have an automatic enrolment pension scheme in place by their staging date if they have someone to automatically enrol on this date. • If there is no one who needs to be automatically enrolled then a pension scheme does not need to be set up ... – but it may be useful to decide which pension would be used if someone asks to join or meets the criteria to be automatically enrolled. • The employer has the right to select the pension and can choose to decline any request to contribute to other schemes. • If the employer does use a scheme requested by a member of staff they need to check that it can be used and is qualifying. For more information go to www.tpr.gov.uk/what-to-consider-when-choosing-a-scheme.aspx DM 2750193 v7C These slides remain the property of The Pensions Regulator and their content should not be altered on reproduction.
Steps for those who have to provide a pension DM 2750193 v7C These slides remain the property of The Pensions Regulator and their content should not be altered on reproduction.
Pensionable earnings • Pensionable earnings can be based on qualifying earnings OR another definition (eg basic pay). • When qualifying earnings are used to determine pensionable pay: – pension contributions are determined by the rules of the scheme, and – will be based on banded earnings between the lower earnings threshold and upper earnings limit (currently £5,824*pa and £43,000*pa). • If pensionable earnings are not based on qualifying earnings, the employer can self certify if the scheme meets certain minimum criteria: – ‘Set 1’ - if basic pay from £1 is pensionable, or – ‘Set 2’ - if at least 85% of total pay (scheme average) is pensionable, or – ‘Set 3’ - if 100% of total pay is pensionable. * Pro-rata of annual amount used in each Pay Reference Period. These figures are for 2016-17. The Secretary of State will review this amount each tax year. DM 2750193 v7C These slides remain the property of The Pensions Regulator and their content should not be altered on reproduction.
Thresholds v Pay Reference Periods (PRP) 2016-17 † Pay Reference Lower Earnings trigger for Upper Earnings Period/Cycle Earnings Threshold automatic Limit (LET) enrolment Annual £5,824 pa £10,000 pa £43,000.00 pa Bi-annual £2,912.00 £4,998.00 £21,500.00 1 quarter £1,456.00 £2,499.00 £10,750.00 1 month £486.00 £833.00 £3,583.00 4 weeks £448.00 £768.00 £3,308.00 Fortnight £224.00 £384.00 £1,654.00 1 week £112.00 £192.00 £827.00 † 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. N.B. The Secretary of State will review these figures each tax year. DM 2750193 v7C These slides remain the property of The Pensions Regulator and their content should not be altered on reproduction.
DC scheme minimum contributions Phase 3 Phase 1 Phase 2 Min DC 8% total * Min DC * % of qualifying earnings 5% total * Min DC 3% Minimum DC 2% total contribution* Min DC 2% employer * employer * Minimum DC 1% employer contribution* New Large Medium Small/micro employers employers employers employers June 2015 May 2017 Feb 2018 April 6 th April 6 th Oct 2012 April 2014 2018 † 2019 † † Subject to parliamentary approval DM 2750193 v7C These slides remain the property of The Pensions Regulator and their content should not be altered on reproduction.
What pension schemes can be used? Must be used for automatic Automatic enrolment scheme Workers already enrolment and active members of a ‘opt ins’ qualifying scheme do not need to be automatically enrolled Employers will Qualifying scheme need to contribute to the pension must be tax registered: scheme and meet minimum criteria Employers may also use a qualifying scheme or an automatic enrolment scheme for entitled workers Scheme for must be registered in the UK or EEA* entitled must have no barrier to automatic enrolment workers must be a qualifying scheme scheme is registered Employers are not *European Economic Area states required to make an employer contribution DM 2750193 v7C These slides remain the property of The Pensions Regulator and their content should not be altered on reproduction.
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. 2. 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. DM 2750193 v7C These slides remain the property of The Pensions Regulator and their content should not be altered on reproduction.
Choosing a new pension - how to find one • The government scheme – National Employment Savings Trust (NEST) is a pension scheme that all employers can use to meet their duties. • Schemes with master trust assurance – the master trust assurance framework provides an independent review against an industry-wide benchmark of quality – these features in our DC code represent the standards of governance and administration that we expect trustees to attain – we list those schemes that have said they’re open to all small employers looking for a scheme provider for automatic enrolment • Schemes listed by other industry bodies – Pensions and Lifetime Savings Association (PLSA) Pension Quality Mark – The Association of British Insurers (ABI) list of GPP providers DM 2750193 v7C These slides remain the property of The Pensions Regulator and their content should not be altered on reproduction.
Choosing a new pension - factors to consider • It is the employer’s responsibility to choose a pension scheme for their workers. • Employers should consider what features are important for their workers, for example: – charges (there is an annual 0.75% charge cap on the default fund) – choice of funds other than the default strategy (eg Sharia,ethical) – options at retirement and/or from age 55 (eg drawdown options) – whether they provide ‘one pot per member’ and rules on transfers – how tax relief is applied (eg through payroll or by the pension provider) – online member services – member communications (may be available in multiple languages) • For help on how to select a good qualifying pension, please see: www.tpr.gov.uk/choosing-a-pension-scheme.aspx DM 2750193 v7C These slides remain the property of The Pensions Regulator and their content should not be altered on reproduction.
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 DM 2750193 v7C These slides remain the property of The Pensions Regulator and their content should not be altered on reproduction.
Opting in and joining • Entitled workers can request to join a scheme at any time , including during postponement. • Jobholders can opt in at any time , including during postponement . • However, workers will not necessarily know whether they are jobholders or entitled workers and this could vary over time. • All requests (whether an opt in or join request) are treated the same way. • On receipt of any request to opt in or join a pension from a worker, employers need to: – assess the worker, to see if they are a jobholder or entitled worker, then – enrol jobholders into an automatic enrolment scheme , and – enrol entitled workers into a scheme of the employer’s choice. • A jobholder must not be required to carry out any further action to achieve active membership (eg the pension scheme should have a default fund). DM 2750193 v7C These slides remain the property of The Pensions Regulator and their content should not be altered on reproduction.
Opting out • Workers automatically enrolled (or who have opted in) may opt out. • Employer must inform staff of their right to opt out and how to opt out. • The employer must not give out or send out opt out forms: – requests to opt out must be handled by the scheme provider, and – completed forms would normally be sent to the employer. • A one calendar month opt out window starts on the later of two dates: once the worker is an active member of the pension scheme, or when the employer gives a notice of enrolment letter/email to the worker. • The worker will get a full refund of all contributions. • Early opt outs (before the opt out window starts) - are not allowed. • After the opt out window has closed, the worker may still request to cease membership of the pension scheme (under the scheme rules). • A worker who has opted out does not need to be assessed again until the employer’s next re -enrolment date (occurs approx every 3 years). DM 2750193 v7C These slides remain the property of The Pensions Regulator and their content should not be altered on reproduction.
Communicating to staff • Employers will need to communicate to their staff informing them of their rights : – enrolment – when using postponement – and to explain a worker’s right to opt in or join a scheme. • The deadline for most communications is within 6 weeks*. • Communications must be sent directly to the individual (eg by letter, email, HR web portal). • We have provided example ‘template’ letters, which may be customised. www.tpr.gov.uk/writing-to-your-clients-staff.aspx * Postponement 6 weeks from the day after the assessment date DM 2750193 v7C These slides remain the property of The Pensions Regulator and their content should not be altered on reproduction.
Record-keeping • Employers must keep records about their workers and the pension scheme used to comply with the employer duties (pension providers and trustees will also have duties to keep records). • An employer can use electronic or paper filing systems to keep or store any records, as long as these records can be produced in a legible way. • Most records must be kept for six years . Those that relate to opting out must be kept for four years. • The records must be provided to The Pensions Regulator, on request. • We can conduct an inspection, if we have reasonable grounds to do so (for example, this may be as a result of a whistle-blower alert). DM 2750193 v7C These slides remain the property of The Pensions Regulator and their content should not be altered on reproduction.
Cyclical re-enrolment • Cyclical re-enrolment occurs around every 3 years. Employer should choose a re-enrolment date which can be any day, up to 3 months before or after the third anniversary of their staging date, or previous re-enrolment date (eg an employer who staged on 1 Oct 2013 may choose any day between 1 July and 31 Dec 2016). • On the re-enrolment date, workers will need to be assessed and (if an eligible jobholder) automatically re-enrolled † if these conditions apply: – they are not already an active member of a qualifying scheme; and – they are not being monitored every pay period (ie they have previously been automatically enrolled or assessed as an eligible jobholder whilst an active member of a qualifying scheme); and i. they opted-out or ceased membership of a qualifying scheme more than 12 months ago - or ii. if they opted-out or ceased membership of a qualifying scheme within the previous 12 months - and the employer wishes to automatically re- enrol them (ie the employer can choose whether to do this or not). • Postponement cannot be used at re-enrolment. † Exceptions may be applicable (eg if in notice period or have tax protection) DM 2750193 v7C These slides remain the property of The Pensions Regulator and their content should not be altered on reproduction.
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) - this change was effective 6 April 2016* • 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. * Previously the deadline for re-declaration was two months after the chosen re-enrolment date. DM 2750193 v7C These slides remain the property of The Pensions Regulator and their content should not be altered on reproduction.
Customising the steps for different employers DM 2750193 v7C These slides remain the property of The Pensions Regulator and their content should not be altered on reproduction.
Support for business advisers on our website DM 2750193 v7C These slides remain the property of The Pensions Regulator and their content should not be altered on reproduction.
Any questions? DM 2750193 v7C These slides remain the property of The Pensions Regulator and their content should not be altered on reproduction.
Useful tools • 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 DM 2750193 v7C These slides remain the property of The Pensions Regulator and their content should not be altered on reproduction.
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 r egistration, 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 v7C These slides remain the property of The Pensions Regulator and their content should not be altered on reproduction.
Thank you 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 The information we provide is for guidance only and should not be taken as a definitive interpretation of the law. DM 2750193 v7C These slides remain the property of The Pensions Regulator and their content should not be altered on reproduction.
Additional slides DM 2750193 v7C These slides remain the property of The Pensions Regulator and their content should not be altered on reproduction.
Useful links More information about pensions: • Choose a pension scheme (or check your existing one): www.tpr.gov.uk/employers/finding-a-provider.aspx • The Association of British Insurers (ABI) list of GPP providers: www.abi.org.uk/Insurance-and-savings/Products/Pensions/Saving-into-a- pension/Automatic-enrolment/Providers • Pensions and Lifetime Savings Association (PLSA) Pension Quality Mark: www.pensionqualitymark.org.uk/pqmreadyschemes.php • National Employment Savings Trust: www.nestpensions.org.uk • A guide to selecting a pension scheme: www.tpr.gov.uk/find-a-new-pension-scheme-for-clients.aspx * the voluntary master trust assurance framework was developed by the Institute of Chartered Accountants of England and Wales (ICAEW) in association with TPR to enable master trusts to obtain independent assurance that their scheme governance and administration meet an industry-wide benchmark of quality. DM 2750193 v7C These slides remain the property of The Pensions Regulator and their content should not be altered on reproduction.
Useful links More information about pensions and automatic enrolment: • Financial Advisers: www.moneyadviceservice.org.uk/en/articles/choosing-a-financial-adviser www.financialplanning.org.uk/wayfinder • Friends of Automatic Enrolment: www.cipp.org.uk/en/Pensions/friends-of-automatic-enrolment/ • The Pensions Regulator: www.tpr.gov.uk/docs/selecting-a-good-automatic-enrolment-scheme.pdf www.tpr.gov.uk/docs/introduction-code-13.pdf DM 2750193 v7C These slides remain the property of The Pensions Regulator and their content should not be altered on reproduction.
Useful links - webinars and videos • Automatic enrolment - your questions answered by our experts www.tpr.gov.uk/press/webinar-your-automatic-enrolment-questions-answered-by- our-experts.aspx • Automatic enrolment - common challenges www.tpr.gov.uk/press/webinar-common-automatic-enrolment-challenges- november-2015.aspx • Automatic enrolment - what’s my role as a business adviser? www.tpr.gov.uk/press/automatic-enrolment-webinar-whats-my-role-business- adviser.aspx • Automatic enrolment - for business advisers. www.tpr.gov.uk/press/webinar-automatic-enrolment-for-business-advisers.aspx • Automatic enrolment - declaration of compliance. www.tpr.gov.uk/press/webinar-automatic-enrolment-declaration-of- compliance.aspx DM 2750193 v7C These slides remain the property of The Pensions Regulator and their content should not be altered on reproduction.
What services will you offer your clients? Decide what services you will offer and what services you will not offer - and inform your clients. Checking your clients’ start (staging) date Being a point of contact Checking who to put into a pension scheme Creating your clients’ action plan and working out your clients’ costs Checking records and payroll processes Choosing a pension Assessing and enrolling staff Writing to your clients’ staff Completing the declaration of compliance Explaining your clients’ ongoing duties DM 2750193 v7C These slides remain the property of The Pensions Regulator and their content should not be altered on reproduction.
The FCA regulations and choosing a pension • Employers have the responsibility to choose a pension (or pensions) for automatic enrolment. • Investment advice to an employer (in their capacity as an employer) is not a regulated activity. • Investment advice to an individual is regulated and should only be provided if an adviser has the appropriate Financial Conduct Authority authorisation. • It may not always be easy to tell whether an employer is seeking advice as an employer or as an individual (eg where the client might join the pension themselves). • Consider the ethical standards set by your professional body and the scope of your professional indemnity insurance. • You may like to specify in the letter of engagement that any advice to an employer is provided to them in their capacity as an employer and not as an individual. DM 2750193 v7C These slides remain the property of The Pensions Regulator and their content should not be altered on reproduction.
Relief at Source (‘not Net Pay Arrangement’) For this tax relief mechanism: – only 80% of the calculated contribution is deducted because ... – ... the member’s pension contribution will be taken after tax has been deducted, and – the pension provider claims 20% tax back from HM Revenue & Customs (HMRC) and adds it to their pension pot. • Higher rate taxpayers will have to complete an HMRC Self Assessment tax return in order to reclaim the rest of the tax paid on their contributions. • Staff who earn no more than their income tax personal allowance (£10,800 a year in 2016/17) do not pay tax, but they would still get the 20% tax relief (even though they haven’t paid any income tax on their contributions). • We suggest that employers with staff who do not pay income tax, choose a pension which operates Relief at source. • Group Personal Pensions, the government scheme (NEST) and some master trust pensions usually calculate tax relief this way. DM 2750193 v7C These slides remain the property of The Pensions Regulator and their content should not be altered on reproduction.
Net Pay Arrangement For this tax relief mechanism: – no tax is payable on the member of staff’s pension contributions, so the employer deducts 100% of the contributions due, and – pays them to the pension provider (ie gross of tax). • If the member earns below their income tax allowance (personal allowance is £10,800 in 2016/17), the member will not get any tax relief benefit. • Higher rate taxpayers may prefer this method, as they would immediately get full tax relief through payroll without having to complete an HMRC Self Assessment tax return. • Contract based pensions, such as Group Personal Pensions (GPPs) may not use this mechanism. • Some, but not all, master trust pensions calculate tax relief this way. DM 2750193 v7C These slides remain the property of The Pensions Regulator and their content should not be altered on reproduction.
Tax relief example A weekly paid member of staff, has a basic salary of £10,400 per annum and: • is a member of a pension scheme where only basic pay is pensionable, and • is paying a 1% member pension contribution (ie 1% of £200 per week) [the employer will also pay a contribution, but this is not affected so is not shown]. Under Net pay arrangement : • the full £2.00 per week is deducted from their gross pay and paid into their pension pot and • as the individual earns under the HMRC personal tax allowance threshold, they don’t pay income tax and are not able to claim any money from HMRC, • so the cost to the employee of the £2.00 member’s contribution is £2.00 . Alternatively, under Relief at source : • the pension provider claims £0.40 tax relief (20% of £2.00) from HMRC, • the balance (£2.00 - £0.40) is deducted from the employee’s net pay, • so a total of £2.00 per week member’s contribution is paid into the pension • and the employee has only paid £1.60 ( for a £2.00 member’s contribution). DM 2750193 v7C These slides remain the property of The Pensions Regulator and their content should not be altered on reproduction.
Is a director a worker? • A director of a company is not classed as a worker, unless • the individual works for the company under a contract of employment and • there is at least one other person working for the company under a contract of employment • A director who is not working under an employment contract is never classed as a worker • The exemptions can apply to more than one director working for the same company. • However, from 6 April 2016, if a director who is classed as a worker triggers automatic enrolment, the employer can choose whether or not to automatically enrol or re-enrol them (the director will have the right to Opt in or join a pension). DM 2750193 v7C These slides remain the property of The Pensions Regulator and their content should not be altered on reproduction.
Example of sole employee/director exemption Type of work contract between Employer duties apply to the individual and this company this individual? Sole director/employee - Peter X (who is a director of this company with an employment contract) Additional director - Sarah X ( not on an employment contract) Additional director - George X ( not on an employment contract) Additional director - Linda √ (Peter* and Linda) (has a written contract of employment) * As there are two directors with contracts of employment, duties apply to both Peter and Linda. This would be the same even if Linda was not a director and was just an employee - Peter’s exemption would stop when she joined. However, from 6 April 2016, an employer can choose whether or not to automatically enrol/re-enrol any directors who become eligible. DM 2750193 v7C These slides remain the property of The Pensions Regulator and their content should not be altered on reproduction.
New exceptions – employed directors and LLP partners • From 6 April 2016, new exceptions were introduced for employers. • If the following individuals become eligible for automatic enrolment or re- enrolment, then the employer may choose whether or not to automatically enrol/re-enrol them: • LLP partners who are workers and are not ‘salaried members’ under HMRC tax rules (duties continue to apply in full to salaried members); • directors who work under a contract of employment, where there is at least one other employee working for the company (ie the sole employee/director exemption does not apply). • All other duties remain, including the duty to communicate to the workers and the employer will still need to make a declaration of compliance whether or not they choose to automatically enrol these workers. • The individuals do have the right to opt in or join a pension. DM 2750193 v7C These slides remain the property of The Pensions Regulator and their content should not be altered on reproduction.
Exception - staff in notice period If notice is given or received by a member of staff (eg resignation or dismissal): • before, or up to 6 weeks after, the automatic enrolment/re-enrolment date then the employer does not have to enrol them. During their notice period that member of staff does not have a right to opt in or join a pension. If notice is withdrawn, then the enrolment duty will be effective from this date. DM 2750193 v7C These slides remain the property of The Pensions Regulator and their content should not be altered on reproduction.
Exception - workers with HMRC tax protection Where an employer has ‘reasonable grounds to believe’ ( eg the worker shows them documentary evidence) that a worker has HMRC tax protected status for their pension savings (eg Primary, Enhanced or Fixed protection): • the employer may choose not to automatically enrol/re-enrol them. The worker would still have the right to opt in/join. DM 2750193 v7C These slides remain the property of The Pensions Regulator and their content should not be altered on reproduction.
Exception - workers who have ceased active membership - i 1. If a worker is assessed and triggers automatic enrolment (for the first time) and they had previously contractually joined a qualifying pension scheme * (even if before the employer’s staging date), then: a. if they ceased membership 12 months or less before the assessment date – then the employer may choose whether or not to automatically enrol them (if the employer chooses not to automatically enrol them, the employer should leave them until the cyclical re-enrolment date); or b. if they ceased membership over 12 months before the assessment date – then they should not be automatically enrolled, but should be left until the cyclical re- enrolment date. 2. Workers who have previously been automatically enrolled and opted out or ceased membership of that scheme, should not be assessed until the cyclical re- enrolment date. This means an employer could choose not to assess any worker who has previously been an active member of a qualifying scheme - until the cyclical re-enrolment date. * or a pension scheme that would have been a qualifying scheme if the worker had been a jobholder when they ceased DM 2750193 v7C These slides remain the property of The Pensions Regulator and their content should not be altered on reproduction.
Exception - workers who have ceased active membership - ii On the cyclical re-enrolment date, the employer should identify workers: • who previously contractually joined a qualifying pension scheme * (even if before the employer’s staging date) or • who have previously been automatically enrolled into a qualifying pension scheme and either opted out or ceased membership of that scheme. These workers should be assessed on the cyclical re-enrolment date and, if an eligible jobholder, automatically re-enrolled - unless : • they ceased membership/opted-out within 12 months (ie 12 months or less) of the cyclical re-enrolment date - in which case, the employer may choose whether or not to automatically re-enrol them. If the employer chooses not to automatically re-enrol them, the employer will have no duty to re-enrol them until the following cyclical re-enrolment date. * or a pension scheme that would have been a qualifying scheme if the worker had been a jobholder when they ceased DM 2750193 v7C These slides remain the property of The Pensions Regulator and their content should not be altered on reproduction.
Exception - workers with winding-up lump sums For a worker who has: i. ceased membership of a defined contribution (DC) scheme, and ii. been paid a Winding-Up Lump Sum (WULS), and iii. ceased employment, and iv. is subsequently re-employed by the same employer... then: if they have an automatic enrolment / re-enrolment date which falls up to 12 months after the payment of the WULS, the employer may choose whether to enrol them or leave them until the next cyclical re-enrolment (and the re-employed worker does not have the right to opt in or join during the 12 months after a WULS payment) or, if they have an automatic enrolment date which falls more then 12 months after the payment of the WULS, then they will have no duty to re-enrol them until the next cyclical re-enrolment date DM 2750193 v7C These slides remain the property of The Pensions Regulator and their content should not be altered on reproduction.
DC self certification during phasing period † Subject to Up to 6 April 2018 From Pensionable Salary parliamentary 5 April 2018 † to 5 April 6 April 2019 † (Basis of approval 2019 † % Contributions) Set 1 2% Employer 3% Employer 4% Employer Scheme Definition / 3% Total / 6% Total / 9% Total (Tier 1) (if >= basic pay from £1) 85% of Total Pay Set 2 1% Employer 2% Employer 3% Employer / 2% Total / 5% Total / 8% Total (scheme average) (Tier 2) Set 3 1% Employer 2% Employer 3% Employer 100% of / 2% Total / 5% Total / 7% Total Total Pay (Tier 3) For further details see the DWP guidance document: www.gov.uk/government/uploads/system/uploads/attachment_data/file/307083/money-purchase- schemes-guidance.pdf DM 2750193 v7C These slides remain the property of The Pensions Regulator and their content should not be altered on reproduction.
Using an existing contract-based pension scheme • For a pension scheme to be a ‘ qualifying scheme’: – it needs to be tax registered – it needs to satisfy the minimum criteria (ie be at or above the legal min employer and total contributions, eg 1% and 2% before 6 April 2018 † ) – and, for a contract-based pension, the employer and pension provider must have a signed agreement, where the employer commits to pay at least the legal minimum employer contributions, and – unless the employer agrees to pay at least the legal minimum total contribution (eg 2% before 6 April 2018 † ) - there must be a jobholder agreement for each active member (an agreement by the member to pay the difference between the employer contributions and the legal minimum total contribution). • Additional criteria apply for an automatic enrolment pension (which must also be a qualifying scheme). † Subject to parliamentary approval DM 2750193 v7C These slides remain the property of The Pensions Regulator and their content should not be altered on reproduction.
What to communicate to workers • Non-eligible jobholders and entitled workers not already in a qualifying pension scheme must be provided with information* telling them about their right to opt in or join a pension scheme. • For eligible jobholders being automatically enrolled (and non-eligible jobholders being enrolled after opting in) they must be provided* with: information about their enrolment what it means for them, including the contributions, and their right to opt out. • Workers subject to a postponement need to be given key information* such as the length of the postponement period and their rights to opt in or join. * See Useful links for template letters DM 2750193 v7C These slides remain the property of The Pensions Regulator and their content should not be altered on reproduction.
Summary of deadlines Action/Communication Deadline Letter to workers who are not already in a qualifying pension 6 weeks after staging scheme at staging Joining window, enrolment notifications 6 weeks from the assessment date (eg before midnight of and transitional period notices Tuesday 12 May, if assessed Wednesday 1 April). opt out window 1 month from when both: • the enrolment notification is given, and • active membership is achieved. Postponement notices 6 weeks from the day after the assessment date (eg before midnight Wednesday 13 May, if assessed on Wednesday 1 April). Complete declaration of compliance after staging 5 months after staging Complete declaration of compliance after re-enrolment 5 months after the 3rd anniversary of the staging date (or previous automatic re-enrolment date) 22 nd day of the month following the month of deduction (19 th day Normal contribution payments to scheme provider for non-electronic payments). New member contribution payments to scheme provider (for 22 nd day (for electronic payments) of the first month, following a all deductions made in first 3 months of membership) three month period starting the day active membership is effective (19 th day for non-electronic payments) eg enrolments 2 January to 1 February = e-payment deadline is 22 May. DM 2750193 v7C These slides remain the property of The Pensions Regulator and their content should not be altered on reproduction.
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