Auto-enrolment for workplace pensions

……………………………What employers

need to knowViv Ray – Deputy Pensions Manager

Emma Shand – Employer Liaison Officer

•Auto-enrolment

•Devon Pension Services Website

•Questions

Auto-enrolment

Viv Ray

(Deputy Pensions Manager)

Auto-enrolment

• What is Auto-enrolment?• Who has to be auto-enrolled?• Opting-out and refunds• Staging date• Postponement and Transitional Period• What an employer must consider• Useful web addresses

Auto-enrolment

What is Auto-enrolment?

• Government initiative to encourage all workers to pay into pensions saving scheme.

• All eligible workers must be auto-enrolled into a qualifying workplace pension scheme (QWPS).

• Auto-enrolment will be phased in over 6 year period starting in October 2012 with the larger employers first.

• Government will set up qualifying savings scheme called NEST (National Employment Savings Trust) for those employers who don’t have their own pension arrangement. (NEST does not apply to eligible LGPS employees)

Auto-enrolmentQualifying schemes

• Need to ensure minimum level of benefits payable to employee.

• Local Government Pension Scheme (LGPS) will be a qualifying scheme.

• Employers must pay a minimum level of contribution (this is already achieved in LGPS).

• No change for existing members (regulations will need slight tweaking).

• As now, eligible employees will be automatically enrolled in LGPS, however, they will not be able to opt-out before commencing employment as they can now.

• LGPS employers cannot choose any other qualifying workplace pension scheme (QWPS).

Auto-enrolment

Who has to be auto-enrolled?

• Those not in Qualifying Workplace Pension Scheme (QWPS) and• Age 22 or over and• Under State Pension Age and• Earn at least £8,105 p.a. (personal tax allowance 2012/13) and• Work in the UK.• If previously opted-out, must be re-enrolled every 3 years.• When employee meets age and pay criteria.• Includes part-time teachers already in TPS as full-time teacher, and re-

employed ill-health teachers who retired before April 1997.

However, all employees already automatically join LGPS

Auto-enrolment

Three categories of Workers

Age

Earnings *

16 – 21 22 – underState Pension Age

State PensionAge – 74

Under lower earnings threshold (£5,564 p.a.) Entitled jobholder

Between £5,564 and £8,105 p.a. f Non-eligible jobholder

Over earnings trigger for automatic enrolment (£8,105 p.a.f) Non-eligible

jobholderEligible jobholder

Non-eligible jobholder

*Earnings: separate contracts treated separately To align with National Insurance contributions lower earnings limitf To align with the PAYE thresholdThe Secretary of State will review the above figures each tax year and the figures for 2013/14 should be announced in November 2012.

EARNINGS – For definition of relevant earnings for Auto Enrolment go to the Pensions Regulators guide – this will not be the same as pensionable earnings.

Auto-enrolment

Qualifying earnings to assess worker category:•Salary or wages•Commission•Bonuses•Overtime•Statutory sick pay•Statutory maternity pay•Ordinary or additional statutory paternity pay•Statutory adoption pay

Go to the Pensions Regulators guide on ‘Assessing the Workforce’ for full details on qualifying earnings

Auto-enrolment

Staging dateStaging is being introduced over a 5-year period starting in October 2012

Date of staging is determined by size of employer in April 2012

Size of employer Staging date timetable

Larger Employer (Over 249 employees) October 2012 – March 2014

Medium Employer (50 – 249 employees) April 2014 – April 2015

Smaller Employer – (Under 50 employees) June 2015 – April 2017

New Employer since April 2012 May 2017 – February 2018

Small employer (Under 50 employees) with same PAYE ref as bigger employer, can choose later staging date

August 2015 – April 2017

Existing employee only New and existing employee

Transitional period can be used for existing eligible jobholders to join in October 2017

Employer can postpone auto-enrolment date by up to 3 months

Employee can opt-in at anytime from original staging date

Auto-enrolment

Communication with employees•At Staging date all members of the LGPS must be given information about the scheme

•Those existing employees who you are automatically enrolling into the LGPS must be provided with information on enrolment, including the contributions and their right to opt out

•Those existing employees who are not eligible jobholders must be told how they can opt in to the LGPS

•If an employer chooses to use the Transitional Period or Postponement then effected employees must be written to with details.

•All new employees must receive the appropriate letter on starting employment.

•There is specific information that each type of employee must receive (see template letters on website)

•There are deadlines for communicating the required information to employees. (see flowcharts on website)

Auto-enrolmentPostponement

Employer can choose to postpone staging date by up to 3 months.

To comply with LGPS regulations employers must use 3 month postponement period for employees on a contract of less than 3 months.

Will need to use postponement for all NOMO employees and send relevant information EVERY time they work, suggest amending claim form/timesheet to include this.

LGPS regulations have been amended from 1 October 2012 to allow employees on a less than 3 month contract to opt in before 3 months.

At original staging date employees on a less than 3 month contract will need individual postponement date and letter.

Auto-enrolment

Transitional period

•Employer can choose to use transitional period which defers staging date for all or any existing eligible jobholders to 1st October 2017.•To comply with LGPS regulations will still need to enrol those with contracts of less than 3 months who have their contract extended to 3 months and longer.•Employer will need to write to existing eligible jobholders to advise of transitional period.•Employee can still opt in at anytime during transitional period.•During transitional period will still need to enrol existing employees who become an eligible jobholder for the first time.•New employees will continue to be contractually enrolled in the LGPS.

Auto-enrolmentOpting out and refunds

• Employer inducement and coercion rules apply since 1 July 2012• Once an employee has been auto-enrolled they can opt-out of the

LGPS within the first month and receive a refund of their contributions if applicable through payroll.

• Employer’s contributions will be adjusted when next payment due.• Employee can only obtain opting-out form from Pension Section once

they have been auto-enrolled and not before. The form will be available on the website for employees to download.

• Employers cannot provide opting-out forms.• LGPS regulations currently permit refund of contributions if less than 3

months service.• Opted-out employees will automatically be re-enrolled at least every 3

years from Staging Date.

Auto-enrolment

What must an employer consider!

• Must ensure that auto-enrolment rules are complied with, this overall responsibility cannot be passed to outside HR/Payroll provider.

• Need to ensure outside HR/Payroll systems provider are able to produce all necessary reports.

• HR/Payroll systems will need to store all relevant information on eligibility and opting-out. (Retain for minimum 6 years).

• Employer will need to provide all employees with written information on auto-enrolment, even for those who are already members of the LGPS. (Letter templates available on website)

...

Auto-enrolmentWhat must an employer consider!

…• Clear audit trail to show that you meet your obligations.

• Employer must have a robust procedure for informing Pension Section of new joiners and those who subsequently opt-out.

• Assess estimated costs of changes and extra employer contributions, although some will opt out.

• Make allowance in budget for these additional costs.

• Certify and register the QWPS with the Pensions Regulator.

• Consider using Postponement and/or Transitional Period.

Auto-enrolmentRegulation changes from 1st October

• Employees with contract for less than 3 months can now opt to join the LGPS. Employer must inform these employees of this choice.

• Employers must no longer give new employees option form to join or not join.

• Employees can only opt out of the LGPS once they have joined the LGPS and not before.

• Employer must NOT give opt out form to employee. Forms can be obtained from Devon Pension Services or website to download.

• Employee can opt out before pension contributions have been deducted and therefore a refund would not be required.

• No change to opt out procedure – refund through payroll still available in first 3 months of employment.

• New opting out form to be made available from January 2013 for all employees

Auto-enrolmentWhat information is available on our website?

• Employers Guide specifically for LGPS employers participating in the Devon Pension fund

• Flowcharts to help employers understand the process for their workers

• Template letters to help employers with the statutory information that each employee must receive.

• Links to relevant webpages

Auto-enrolment

Any questions?

Auto-enrolment

Useful web addresses

Pensions Regulatorwww.thepensionsregulator.gov.uk

Department of Work and Pensionswww.dwp.gov.uk/policy/pensions-reform/workplace-pension-reforms/

Devon Pension Serviceswww.devonpensions.org

Contact info

Webwww.devonpensions.orgwww.lge.gov.ukwww.lgps.org.uk

Emailpensions@devon.gov.uk viv.ray@devon.gov.ukemma.shand@devon.gov.uk