Pension Auto-Enrolment

Cameron Freer DipPFS

Senior Consultant

Auto-Enrolment – In a nutshell...

From 2012, the process of automatically enrolling employees into a qualifying

workplace pension or similar scheme, such as National Employment Savings

Trust (NEST), will begin

Employers must make contributions for any employees auto-enrolled into a

workplace pension scheme

What will employers have to do?

Employers will be required by law to:

Set up & register a suitable pension scheme

Provide Pension/Auto-Enrolment information to employees

Enrol all eligible employees into a qualifying scheme

Confirm all relevant steps taken to The Pensions Regulator (TPR)

Pay contributions for all eligible employees, unless they choose to opt-out of the

scheme

When will this affect employers?

Every employer has been allocated a ‘Staging Date’, the date from which that

employer must comply with the new legislation.

1st October 2013 - Employers with 800 - 1,249 employees

1st November 2013 - Employers with 500 - 799 employees

1st January 2014 - Employers with 350 - 499 employees

1st February 2014 - Employers with 250 - 349 employees

1st April 2014 - Employers with 160 - 249 employees

1st May 2014 - Employers with 90 - 159 employees

1st July 2014 - Employers with 62 - 89 employees

From 1st August 2014 - Employers with 61 or less employees

The full list of staging dates can be found on The Pension Regulator’s website:

http://www.thepensionsregulator.gov.uk/employers/staging-date-timeline.aspx

How much will this cost? The amount of contributions that must be paid into a qualifying scheme is being

phased in as follows:

October 2012 to

September 2017

October 2017 to

September 2018

October 2018

onwards

Total Minimum Contribution 2% 5% 8%

Employer Minimum

Contribution

1% 2% 3%

Employee Minimum

Contribution

1% 3% 5%

The minimum contributions are a % of band earnings between £5,564 and

£42,475 (known as, ‘Qualifying Earnings’) for 2012-13.

Auto-Enrolment: The first steps

Assess your workforce

(HR/Legal)

Determine what qualifying pension scheme(s) will be used

(HR/Payroll)

Determine what contribution basis will be used

(Finance)

Establish the auto-enrolment process

(HR/Legal/Payroll/Finance)

Employer with

NO scheme

Employer with

an EXISTING scheme

Find out Staging Date Find out Staging Date

Assess Workforce Assess Workforce

Determine Earnings Definitions Review Earnings Definitions

Calculate Costs Calculate Costs

Consider Scheme Type Review Existing Scheme Type

Communicate to Workers Communicate changes/terms to

workers

Plan implementation Plan implementation

Enrol eligible job holders Enrol eligible job holders

Register with TPR & keep records Register with TPR & keep records

Contribute to workers pensions Contribute to workers pensions

Those first steps in detail...

Assess the workforce

Who can Join and who must receive an Employer Contribution?

Auto-Enrol Can Opt In or

Join

Employer

Contribution

Eligible Jobholders

Non-eligible Jobholders

Entitled Workers

2012/13 Qualifying Earnings

Age < £5,564 £5,564 - £8,105 > £8,105

16-21 Entitled Worker Non-eligible Jobholder Non-eligible Jobholder

22-SPA Entitled Worker Non-eligible Jobholder Eligible Jobholder

SP-75 Entitled Worker Non-eligible Jobholder Non-eligible Jobholder

What about changing earnings?

Continual assessment

Ea

rnin

gs

Monthly AE trigger £675.42

Self-Certification options

For 2012/13 Employer

Minimum Minimum Total

Pensionable Pay

(must be at least equal to Basic Pay) 4% 9%

Qualifying Earnings

(£5,564 - £42,475) 3% 8%

Pensionable Pay

(provided that constitutes at least 85% of earnings) 3% 8%

All Earnings

(P60) 3% 7%

Automatic Enrolment Date

Elig

ible

Sta

gin

g D

ate

/ S

tart

ing

Da

te

Employer must automatically

enrol/assess workers within 3

months

Auto-Enrolment

Max 3 month window

1 month

communication

window

1st pay day - deduct contributions

1 month opt out

window

Refu

nd

Op

t o

ut

Salary exchange / Salary sacrifice “Some employers make pension contribution payments by a salary sacrifice

arrangement....An employer operating a pension scheme and enrolling workers

using salary sacrifice is doing so outside the automatic enrolment provisions. ”

Workplace Pension Reform – Detailed Guidance No.4

February 2012 v3.0

“Special legislation has been enacted...for the following exempt benefits:

...Employer made contributions under a registered pension scheme

It is not necessary to stipulate a period for which the arrangement must be

entered into or to set out 'lifestyle changes'.”

HMRC

What must employers not do?

Offer advice

Discourage membership

Encourage jobholders to opt out

Distribute the Opt Out form

Use ‘prohibited recruitment conduct’

Create barriers to the auto-enrolment process

Doing nothing is not an option!

“A person guilty of an offence under this section is liable

a) on conviction on indictment, to imprisonment for a term

not exceeding two years, or to a fine, or both;

b) on summary conviction to a fine not exceeding the

statutory maximum.”

The Pensions Act 2008, Section 45(2)

Source: Pensions Act 2008, Office Of Public Sector Information – www.opsi.gov.uk.

Why act now?

Ensure existing budgets are fit for purpose

Employee engagement

Consider Salary Exchange

Retail Distribution Review

Be one step ahead...

The Pensions Regulator www.thepensionsregulator.gov.uk

Important Information

The information contained within this presentation is based on our

understanding of present law and HM Revenue and Customs practice, which

may be subject to change.

The presentation is for illustrative purposes only and should not be construed as

advice. No actions should be taken based on the information in this presentation

alone.

Kingston Smith Financial Advisers are appointed representatives of Argentis

Financial Management, who is authorised and regulated by the Financial

Services Authority.

The Financial Services Authority does not regulate tax and trust advice.

The value of an investment can fall as well as rise. If investments are encashed

in the early years the investor may get back less than the amount originally

invested.

Past performance is no guarantee of future returns.

Employment Tribunal Reforms

Joanna Cowie

Head of Legal

Resolving disputes before claims:

Mandatory early conciliation by ACAS

Standard wording for compromise agreements

“Protected Conversations”

Reforming the Tribunal System:

Judges to hear unfair dismissal cases “sitting alone”

Fees for Employees to bring tribunal claims

“Fines” for employers losing at tribunal

From April 2012:

Qualifying period for unfair dismissal – 2 years

service

Only for new starters from 6 April 2012

Written reason for dismissal – 2 years service

Employment Tribunal Fees:

Effective from Summer 2013:

Level 1 (unpaid wages & redundancy pay)

£160 to lodge a claim

£230 at start of hearing

Level 2 (unfair dismissal, equal pay & discrimination cases)

£250 to lodge a claim

£950 at start of hearing

Remission System

What’s new?

Reforms for:

TUPE Regulations

Collective consultation for large redundancies

New employment law cases

........ and finally

Written evidence wins employment cases !

Ensure that every stage of the employment

relationship is carefully and regularly documented

Appraisals, appropriate disciplinary warnings,

redundancy selection processes, grievance

procedures, etc.

If in doubt, write it out!

I said this

and he

said that ...

Status of Workers and Interns

Richard Cummings

Principal Consultant, HR Insight Ltd

What kind of relationship?

Employment

Relationship

Worker

Relationship

Self Employment?

Permanent employees

Fixed term (Temporary)

Apprenticeship schemes

Casual employees

Agency work

CIS

Freelance

Contractors

Interns

Status options 1

Permanent employees

Part time

Fixed term

Apprentices

Employment relationship

Right to written terms of employment

Mutuality of obligation

Minimum of 28 days paid holiday leave

Sick pay, redundancy, family friendly policies

Statutory or agreed notice periods

Disciplinary & grievance procedures

Unfair dismissal rights after 2 years

Status options 2

Casual workers

Agency workers

The self employed? – Freelancers and consultants

Interns

Limited companies

Worker relationship

Working Time Regulations 1998

Minimum of 28 days paid holiday leave

Minimum levels of breaks

Limits on weekly working hours

Casual workers: Rights when not casual

Agency workers: Rights from 1 October 2011

When to engage self employed people?

Cover fluctuations in workload

Cover during start up or expansion phases of the

business

One off projects that are unlikely to repeat

Bring in specific expertise (long or short term)

Deliver lower fixed overheads for the business

Low rights – potential higher long term costs

Interns

Paid

Unpaid

Test cases

Dangers of getting it wrong

Claims from the employee

Holiday pay

Notice periods

Redundancy

Claims from HMRC

National Insurance contributions

Unpaid tax

Any Questions?

Tel: 01708 758 958