Pension auto enrolment

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Auto Enrolment How Does This Affect You ? Colin Walker Independent Financial Advisor

Transcript of Pension auto enrolment

Page 1: Pension auto enrolment

Auto Enrolment How Does This Affect You ?Colin Walker

Independent Financial Advisor

Page 2: Pension auto enrolment

Today we will look at

Employer Awareness What’s happening and when? Preparing for Automatic Enrolment When do I have to have my scheme in place? What makes a scheme qualifying? Who is eligible for Automatic Enrolment? Contributions – phasing In

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Today we will look at

Simplified Certification Options Opting Out Additional Requirements Enforcement Employers- who deals with Auto Enrolment

Issues? Is there anything I can do to fund this more

efficiently?

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Employers awareness of Automatic Enrolment

Employers with no existing pension scheme: responses to Automatic Enrolment - NEST

Auto-Enrol into an Employer scheme:76% Unlikely 8% Likely3% Highly Unlikely

Auto-Enrolment into NEST:66% Unlikely7% Likely18% Highly Unlikely9% UnsureSource: ACA survey of smaller firms views on Auto Enrolment And NEST 2011

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Auto Enrolment October 2012- September 2017 Staging date depends on employer size, but

can be brought forward Employer must enrol eligible employees (job

holders into qualifying Scheme) Provide information to all employees Eventually required to pay 3% of qualifying

earnings (minimum 8% overall) Register with TPR and keep records 4-8 million new savers in workplace from 2012 Additional £10bn-15bn annual savings by 2050

What’s Happening And When?

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Preparing for Automatic Enrolment

Employer-no scheme Find out Staging Date Assess the workforce Determine earning definitions Calculate costs Consider scheme type Communicate to workers Plan implementation Enrol eligible job holders Register with TPR & keep

records Contribute to workers

pensions

Employer-with scheme Find out Staging Date Assess the workforce Review/determine earnings

definitions Calculate Costs Review existing Scheme Consider scheme type Communicate

changes/terms to workers Plan implementation Enrol eligible job holders Register with TPR & keep

records Contribute to workers

pensions

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When do I have to have my scheme in place?

Employer Staging DatesEmployer size Auto-enrolment staging datePAYE scheme size Staging date120,000 or more 1 October 201250,000-119,999 1 November 201230,000-49,999 1 January 201320,000-29,999 1 February 201310,000-19,999 1 March 20136,000-9,999 1 April 20134,100-5,999 1 May 20134,000-4,099 1 June 20133,000-3,999 1 July 20132,000-2,999 1 August 20131,250-1,999 1 September 2013800-1,249 1 October 2013500-799 1 November 2013350-499 1 January 2014250-349 1 February 201450-249 1 April 2014 to 1 April 2015Test tranche <30 Employees 1 April 2015 to 30 June 201530-49 Employees 1 August 2015 to 1 October 2015Less than 30 Employees 1 January 2016 t0 1 April 2017New Employers 1 May 2017 to 1 February 2018The rules for staging within each size grouping have still to be confirmed.

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What makes a scheme qualifying

Does it permit Automatic Enrolment? Are employees enrolled automatically within 3

months of joining? Does the scheme have a “default” investment

option? Recognising the likely characteristics & needs of

employees Appropriate balance between risk & return Glide path to safer assets as retirement approaches Does it meet one of the minimum contribution tests? Does it have an opting out facility?

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Who is eligible for Automatic Enrolment?

Assessing and categorising the workforce

2012/2013 levels Qualifying Earnings

Age < £5,564 £5,564 - £8,105 > £8,10516-21 Entitled

WorkerNon-eligible jobholder

Non-eligible jobholder

22-SPA Entitled Worker

Non-eligible jobholder

Eligible jobholder

SPA-75 Entitled Worker

Non-eligible jobholder

Non-eligible jobholder

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Contributions – phasing in

Based on Qualifying Band Earnings

Steady State Defined contribution 1% employee

contribution3%

employee contribution

5% employee contribution

Defined contribution 1% employer contribution

2% employer

contribution

3% employer contribution

Staging period

October 2012 October 2017

October 2018

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Simplified Certification Options

Qualifying Earnings Definition (2012/13) – P60 income from £5,564 to £42,475 Employer minimum Minimum totalFull basic salary (pensionable

pay)4% 9%

Full basic salary, and at least 85% of total pay is

pensionable

3% 8%

Total earnings (p60) 3% 7%

Employer industry & demographic will drive decisions

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Opting Out

Opting out

Engage Your

workforce

1 mont

h Windo

w

Opt out

Notice

Fill in

Notice

Refund

Worker

Inform Provid

er

Refund Employ

er

Review Engage

your Workforce

1 month Windo

w

Opt out

Notice

Fill in Notice

Refundworker

Inform Provider

Refund Employ

er

Default ‘re-enrolment date’ is 3rd anniversary of Employer staging date every 3 years.

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Additional Requirements

All Employers will have additional regulatory requirementsEmployers prohibited from incentivising opt outsRegister with TPR to show they are meeting their dutiesPayments will be monitored by Administrators or Scheme Trustees who need to report failuresMust keep records for 6 yearsMust retain Opt in & Opt Out notices for 4 years

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Enforcement

Fines from the RegulatorStage 1 - A compliance/unpaid contribution noticeStage 2 - Fixed penalty of £400Stage 3 – Escalating daily penalties Number of Persons Prescribed daily rate1-4 £505-49 £50050-249 £2,500240-499 £5,000500+ £10,000

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Number of Employees Pensions Dept/Human Resources

? ‘Payroll’

Organisation

Employers – Who Deals With Auto Enrolment Issues?

large

medium

small

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“…the overarching view is that salary sacrifice is here to stay, and will prove to be a valuable tool for advisers looking to manage the transition to auto enrolment.” Source: Corporate Adviser – September 2010

Is there anything I can do to fund this more efficiently?

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Questions