Workplace Pensions Employers
What is Pensions Auto Enrolment? • Pensions Auto Enrolment will have an effect on any business in the UK that employs staff, whether it’s just 1 person or 1000. • Started back in October 2012, and phased in depending on the size of the employer, all eligible workers will need to be automatically enrolled into a Qualifying Workplace Pension Scheme with mandatory minimum contributions from the employer and the employee. • It is essential to be prepared, to ensure the changes required to systems are identified and all parties, including HR and payroll, fully understand what is required of them. • Employers need to understand their duties associated with these new laws, as they could be potentially time consuming, complex to manage and costly to administer.
Compliance Requirements for the Employer Companies will be required to do the following: • Assess - eligibility of all employees • Register - with the regulator • Comply - Ensure that their pension schemes comply with all regulations • Manage – Manage the enrolment process for all employees • Update - Manage and update the opting in and out of employees • Contributions - Manage contributions • Inducements - Ensure that inducements to opt out are not offered • Communications - Provide regular updates and employee communications • Re-enrol – Re-enrol opted out employees on a regular basis • Records - Keep accurate records of all the above.
Failure to Comply If an employer does not comply, the following consequences will apply:- “Wake up call” fine £400 Persistent offenders will have escalating fines • 5-49 employees up to £500 per day • 50-249 employees up to £2,500 per day • 250- 499 employees up £5,000 per day
Why is this happening? • Lack of retirement saving. • Dependency on state funded retirement. • Cost – The state can no longer afford to fund state pensions throughout life.
The 8 Key steps
Knowing your staging date Employees Date 90-159 01-May-14 62-89 01-Jul-14 61 01-Aug-14 60 01-Oct-14 59 01-Nov-14 58 01-Jan-15 54-57 01-Mar-15 50-53 01-Apr-15 Test for fewer than 30 01-Jun-15 To 30-Jun-15 30-49 01-Aug-15 To 01-Oct-15 Fewer than 30 01-Jan-16 To 01-Apr-17 Your staging date will be determined by the payroll run that you had in April 2012.
Contribution rates Minimum employer / employee contributions Staging period Employer Employee Tax relief Total Oct 2012 to Sept 2017 1% 0.8% 0.2% 2% Oct 2017 to Sept 2018 2% 2.4% 0.6% 5% Oct 2018 onwards 3% 4% 1% 8% Total Contribution Employer contribution Pensionable Pay 9% of pensionable pay 4% No quality test required 8% of pensionable pay 3% Pensionable pay is at least 85% of the total pay bill for the workers 7% of pay 3% All pay is pensionable
Assessment of Workforce Yearly gross earnings Age Monthly Gross Earnings From 16 to 21 From 22 to SPA* From SPA to 74 Has a right to join a pension scheme 1 £5,824 and below £486 and below Has a right to opt in 2 Over £5,824 up to £10,000 Over £486 up to £833 Has a right to opt in Automatically enrol 3 Has a right to opt in Over £10,000 Over £833 Figures correct as of 2015/2016. *SPA = state pension age 1 Has a right to join a pension scheme If they ask you to, you must provide a pension scheme for them, but you don’t have to pay contributions. 2 Has a right to opt in If they ask to be put into a pension scheme, you must put them in your automatic enrolment pension scheme and pay regular contributions. 3 Automatically enrol You must put these members of staff in your automatic enrolment pension scheme and pay regular contributions. You don’t need to ask their permission.
QWPS (Qualifying Workplace Pension Scheme) The Company will be required to auto-enrol all eligible jobholders into a qualifying pension scheme. If a pension scheme can accept new members, the Company will need to decide if it is to be used as a qualifying scheme for auto- enrolment purposes. What makes a scheme qualifying? • Can staff automatically opt into it? • Does the scheme have a “default” investment option? • Does it have an opt out facility? • Does it meet one of the minimum contribution tests?
Communication • Inform - inform all workers • Information - The correct information at the right time • Communication - On an individual basis, in writing (email is acceptable), of any/all changes and how they changes affect them • Inducement - offering no inducement or advice from the employer The key principles for successful communication include: • Control - Ensuring employees feel in control • Clarity - Making it clear what employees will personally get out of it • Relevance - Tailoring the information for each employee group • Language - Presenting information in language that is simple and easy to understand • Repeating – Repeating information consistently across the different channels • Questions - Allowing opportunities for conversations and for questions and answers • Understanding - Ensuring all the relevant parties in the business understand what role they will be expected to play and that they have the necessary information to fulfil that role.
Auto Enrolment of ALL eligible employees If a scheme is a Q.W.P.S under the legislation all eligible employees will need to be auto-enroled into it on the staging date, even if they have previously been offered membership. The duty is on the employer to enrol every eligible jobholder into a qualifying pension scheme. After this it is up to the employee whether to opt in or not. Employers must not encourage employees to opt out or take action to encourage opt out. Registration with the Pensions Regulator (tPR) You will need to register with the pensions regulator within 4 months of your staging date. You will be able to register through a number of different online gateways: • Government gateway • Exchange – tPR’s online service • Through the JFB system
Monitoring and Managing Records Data The following need to be monitored; • Opt -outs, opt-ins (on a monthly basis) • Re -assess workforce (on a monthly basis) • Wage increases • Birthdays • Retirees • Contractors • New joiners • Potential Postponements • Employees on probation • Monitor Leavers.
Important Information For most investments, the value and any income can go down as well as up, return is not guaranteed and the investor might not get back the amount of their original investment. If the product or fund invests overseas, this may in part be due to exchange rate variations. Most investments should be considered as a medium to long term commitment, meaning you should be prepared to hold them for at least 5 years. Additionally, the value of any tax benefits described depends on your individual circumstances. Tax rules may change in the future. This information is based upon our understanding of current law and HMRC Revenue & Customers practice. Legislation and practice may change. HFB Financial Planning Ltd is an appointed representative of Intrinsic Financial Planning Limited and Intrinsic Mortgage Planning Limited, which is authorised and regulated by the Financial Conduct Authority. Intrinsic Financial Planning Limited and Intrinsic Mortgage Planning Limited are entered on the FCA register www.fca.org.uk/register/ under reference 440703 and 440718. Intrinsic Financial Services Limited, registered in England No 5372217. Registered Office: Wiltshire Court, Farnsby Street, Swindon, SN1 5AH.
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