Introduction to Auto Enrolment

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Transcript of Introduction to Auto Enrolment

1. An Introduction toAn Introduction to Auto EnrolmentAuto Enrolment 2. Work Place Pensions Auto Enrolment The Pensions Regulator Pension Providers Auto Enrolment Functionality in QTAC Payroll Planning for Success By the end of this presentation you should be confident with the following concepts: 3. Contents of PresentationContents of Presentation 1. What is Auto Enrolment 2. Contributions 3. Staging Dates 4. Key Terms 5. The Pensions Regulator 6. Pension Providers 7. How can QTAC Payroll help 8. 7 Key Steps to Success 9. Q&As 4. What is Auto EnrolmentWhat is Auto Enrolment Workplace Pension Reform is the term used to describe the changes to pensions in the UK, where employees are automatically enrolled into an Automatic Enrolment pension scheme, as long as they qualify. A workplace pension, which is arranged by the employer, is a way for employees to save for retirement. Some workplace pensions are also called occupational, works, company or work- based pensions. If a company already has a pension scheme they will need to check that it qualifies if their plan is to use that scheme as their Workplace Pension. Companies who do not currently have a pension scheme setup will need to set up an Auto Enrolment scheme. The pension scheme must qualify - meaning the employee and employer contributions match or exceed the minimum contributions (detailed later in this document) and also that no restrictions are placed on membership. Every company will be required to offer employees the chance to join a pension scheme, which both the employee and employer will contribute in to. The employer has to contribute at least the minimum contribution into the scheme in order for the scheme to qualify. In most cases the government also add money into the pension scheme in the form of tax relief. 5. About Auto EnrolmentAbout Auto Enrolment Employees need to be automatically enrolled if they: Are aged between 22 and State Pension Age Earn more than 10000 a year (2014/15 limit) Work in the UK 6. About Auto EnrolmentAbout Auto Enrolment If a company does not have a qualifying pension scheme then it must introduce one. If the employer doesnt currently make a contribution to the pension, they will have to by law when they automatically enrol entitled workers. Employers are responsible for ensuring they have a compliant pension scheme in place and that the correct employees and employers contributions are paid into the scheme. Whats the reason for auto enrolment? The average life span has increased and people are living a lot longer. These changes to pensions are because the current state pension will just not be sufficient when retiring and therefore trying to encourage people to save for retirement. Summary 1901 10 Workers for every 1 Pensioner 2010 3 Workers for every 1 Pensioner 2050 2 Workers for every 1 Pensioner 7. Auto Enrolment so farAuto Enrolment so far One Year in into the Pension Reform More than 750,000 members Over 2,350 employers Opt outs around 8 per cent Feedback that we are hearing Be prepared Demand for standardised payroll-centric solutions 8. ContributionsContributions Contributions are the amount both the employee and employer will contribute to the employee pension pot. For many companies this may involve an increased cost for each employee enrolled into the pension. Below is the proposed contribution period: **These percentages and dates could be subject to change. ++ If the employee pays income tax, the government will add money to the pension in the form of tax relief. The tax relief will be shown differently depending on the pension type being used either a Net Pay Agreement (NPA) or a Relief at Source (RAS). If running an NPA pension, the employee will see a 1% deduction on their payslip. Running a RAS pension, the employee will see the 0.8% on the payslip and the 0.2% tax relief is added by the government. Note that these contributions are based on the bare minimum employer contributions, so that as long as the Minimum Contributions are met, the contributions being taken are enough. For example, the minimum employer contribution up to October 2017 is 1% and the minimum total contributions are 2%, this means the employer can choose to contribute the whole 2% and the employee to contribute 0%. 9. Staging DatesStaging Dates Each company will have their own staging date, your auto enrolment staging date is determined by the size of your PAYE scheme on the 1st April 2012. Staging dates will be staggered, with larger employers starting sooner and small employers starting later. Q3. 2016/7 180.000 employers Q4. 2016/7 230.000 employers Q1. 2017/8 190.000 employers Large Staging Quarters 10. Staging DatesStaging Dates What is my staging date? The date you need to Automatically Enroll all eligible workers How do I find it out? Visit The Pensions Regulators website Use the Staging Date Calculator www.thepensionsregulator.gov.uk/ A company can choose to move its staging date to an earlier date but it cannot be moved to a later one. A pension scheme can be setup for employees at any time. You do not have to wait until auto enrolment is introduced. We recommend that you give yourself plenty of time to prepare 11. Key TermsKey Terms Auto Enrolment This is the term used to describe the changes to pensions, where employers will automatically enrol eligible jobholders into a pension scheme. Workplace Pensions This is where employees can be automatically enrolled into a pension scheme. This is the pension scheme setup for your employees retirement thats arranged by the employer. Both the employee and employer can contribute, though the employer must contribute for it to qualify as an auto enrolment pension scheme. Staging Date This would be the date by which companies should start enrolling those eligible into a qualifying pension scheme. Postponement Postponement is the postponement of employees assessment which can be up to 3 months after a companies staging date. Postponement reduces the risk of difficult pro-rated calculations and problems relating to refunding of contributions due to people opting out in a different tax year to the one in which deductions were made. 12. Key TermsKey Terms Qualifying Earnings These are earnings used to identify if an employee is an eligible or non-eligible jobholder or an entitled worker. Qualifying earnings include: basic pay, wages, salary, bonuses, overtime, commission and any maternity/paternity/adoption/sick pay. Contributions These are what both the employee and employer will contribute into the employees pension pot. Opt Out Employees who have been automatically enrolled can choose to opt out if they wish. Employees have a 6 week window after being auto-enrolled as member of Auto Enrolment Pension Scheme during which they can opt-out. If they do so in this time then any employees and employers contributions deducted are refunded by the Pension Provider. Opt In Certain employees, who dont earn enough to be automatically enrolled, but do have qualifying earnings greater than the lower limit, can choose to opt in to the pension unless they are already an active member of a qualifying pension scheme. 13. Key TermsKey Terms As shown in the Contributions slide earlier, with auto enrolment pensions, if the employee pays income tax, the government will add money to the pension in the form of tax relief. The tax relief will be shown differently depending on the pension type being used either a Net Pay Agreement or a Relief at Source. Net Pay Agreement Using a Net Pay Agreement pension the employees contribution reduces the taxable gross pay and hence the employee receives the tax relief at the payroll end by paying less tax. Relief at Source Using a Relief at Source pension, an amount of tax relief is added by the government at the pension providers end. The Pensions Regulator They are the UK regulator of work-based pensions. They are responsible for auditing companies ensuring that employers are compliant with auto enrolment. NEST The National Employment Savings Trust is a pension provider available to all employers who want to use them. They offer a pension scheme designed for automatic enrolment that any UK employer can use to meet their new workplace pension duties, no matter what the size of the organisation. However they are not the only choice. 14. The Pensions RegulatorThe Pensions Regulator The Pensions Regulator is overseeing the implementation of auto enrolment. They are available for help and guidance if required. You can visit their website: www.tpr.gov.uk Employers MUST register with The Pensions Regulator to confirm the company is complying with auto enrolment. The deadline for registering is 5 months after the company staging date (what youve done to be compliant). Employers will need to provide a number of details when registering with The Pensions Regulator: Employer details: Name, Address, Email and all PAYE reference numbers Details of the pension scheme(s) being used: Scheme name, Employer Pension Scheme Reference (EPSR), Pension Scheme Registry Number (if there is one) Number of Employees: The number of workers employed on the staging date (or on the last day of any postponement periods). Number of Employees enrolled into the Pension: Number of eligible jobholders automatically enrolled into the pension scheme 15. The Pensions RegulatorThe Pensions Regulator Late Compliance Employers may receive penalties/fines for late registration. Penalty notices will be issued to punish persistent and deliberate non-compliance. A fixed penalty notice will be issued if you dont comply with statutory notices, or if theres sufficient evidence of a breach of the law. This is fixed at 400 and payable within a specific period. The Pensions Regulator can also issue an escalating penalty notice for failure to comply with a statutory notice. This penalty has a prescribed daily rate o