Pension auto enrolment
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Auto Enrolment How Does This Affect You ?Colin WalkerIndependent Financial Advisor
Today we will look atEmployer AwarenessWhats happening and when?Preparing for Automatic EnrolmentWhen do I have to have my scheme in place?What makes a scheme qualifying?Who is eligible for Automatic Enrolment? Contributions phasing In
Today we will look atSimplified Certification OptionsOpting OutAdditional RequirementsEnforcementEmployers- who deals with Auto Enrolment Issues?Is there anything I can do to fund this more efficiently?
Employers awareness of Automatic EnrolmentEmployers 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
Auto Enrolment October 2012- September 2017Staging date depends on employer size, but can be brought forwardEmployer must enrol eligible employees (job holders into qualifying Scheme)Provide information to all employeesEventually required to pay 3% of qualifying earnings (minimum 8% overall)Register with TPR and keep records4-8 million new savers in workplace from 2012Additional 10bn-15bn annual savings by 2050
Whats Happening And When?
Preparing for Automatic EnrolmentEmployer-no schemeFind out Staging DateAssess the workforceDetermine earning definitionsCalculate costsConsider scheme typeCommunicate to workersPlan implementationEnrol eligible job holdersRegister with TPR & keep recordsContribute to workers pensions
Employer-with schemeFind out Staging DateAssess the workforceReview/determine earnings definitionsCalculate CostsReview existing SchemeConsider scheme typeCommunicate changes/terms to workersPlan implementationEnrol eligible job holdersRegister with TPR & keep recordsContribute to workers pensions
- When do I have to have my scheme in place?Employer Staging DatesEmployer sizeAuto-enrolment staging date50-249 1 April 2014 to 1 April 2015Test tranche
What makes a scheme qualifyingDoes 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 employeesAppropriate balance between risk & returnGlide path to safer assets as retirement approachesDoes it meet one of the minimum contribution tests?Does it have an opting out facility?
Who is eligible for Automatic Enrolment?Assessing and categorising the workforce
Qualifying Earnings Age< 5,5645,564 - 8,105> 8,10516-21Entitled WorkerNon-eligible jobholderNon-eligible jobholder22-SPAEntitled WorkerNon-eligible jobholderEligible jobholderSPA-75Entitled WorkerNon-eligible jobholderNon-eligible jobholder
Contributions phasing in
Based on Qualifying Band Earnings Steady State Defined contribution 1% employee contribution3% employee contribution5% employee contribution
Defined contribution 1% employer contribution2% employer contribution3% employer contributionStaging period
October 2012 October 2017 October 2018
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 pensionable3%8%Total earnings (p60)3%7%Employer industry & demographic will drive decisions
Opting outEngage Your workforce1 month WindowOpt out Notice Fill inNotice Refund Worker Inform Provider Refund EmployerReview Engage your Workforce1 month Window Opt out Notice Fill in Notice Refundworker Inform Provider Refund Employer Default re-enrolment date is 3rd anniversary of Employer staging date every 3 years.
Additional RequirementsAll 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
EnforcementFines from the RegulatorStage 1 - A compliance/unpaid contribution noticeStage 2 - Fixed penalty of 400Stage 3 Escalating daily penalties
Number of PersonsPrescribed daily rate1-4505-4950050-2492,500240-4995,000500+10,000
Number of Employees Pensions Dept/Human Resources ? Payroll Organisation
Employers Who Deals With Auto Enrolment Issues?largemediumsmall
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 2010Is there anything I can do to fund this more efficiently?