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PM1: MEETING YOUR PENSION AUTOMATIC ENROLMENT DUTIES AND PENSIONS CHANGESANDY CAMPBELL CFPEMPLOYEE BENEFITS MANAGER, LUCAS FETTES

Automatic Enrolment

Automatic Enrolment (AE)

Overview of AE duties and key

employer decisions

AE in practice and managing

employer duties

2016 Pension update and

Q&A

Introduction and Background

Flat rate state pension

Increased state retirement age

Diminishing final salary scheme

Removal of default

Retirement Age

State Pension Time bomb

The story so far

Period Ending Completed declaration of compliance

Workers enrolled

March 2013 84 308,000

March 2014 10,817 3,200,000

March 2015 45,820 5,200,000

March 2016 110,103 6,100,000

Remaining staging date timetable

Employer Size Quarter (Financial Year) Forecast Volumes

Small & micro employers

Q1 2016/2017 101,000

Q2 2016/2017 133,000

Q3 2016/2017 168,000

Q4 2016/2017 215,000

New employers

Q1 2017/2018 178,000

Q2 2017/2018 137,000

Q3 2017/2018 131,000

Q4 2017/2018 87,000

Failure to comply

Initial Fixed Penalty £400

Number of people in PAYE Scheme Daily accrual rate

1 – 4 £50

5 – 49 £500

50 – 249 £2,500

250 – 499 £5,000

500 or more £10,000

Notices served

Power Description Number in Period

Number to March 2016

Fixed penalty notice

A fixed Penalty Notice under section 40 of the Pensions Act 2008 of £400 for failure to comply with a statutory notice or some specific employer duties

806 2,234

Escalating penalty notice

An escalating penalty under section 41 of the Pensions Act 2008 of between £50 and £10,000 per day (depending on size) for failure to comply with a statutory notice

96 127

Planning ahead of your staging date

• Check existing arrangements • Identify cost impact• Decide upon your AE scheme rules • Identify if you need to establish a new workplace pension scheme • Decide if you will undertake a market review• Implement the scheme• Ensure you have supported processes in place to manage AE

compliance• Communicate with staff

Worker assessments

Staff type Age band Earnings Enrolment Duty Employer Contributions

Eligible jobholders22 – SPA*

£10,000+Must be

automatically enrolled

Yes

Non-eligible jobholders

16 – 21 orSPA – 74 £10,000+

Have a right to opt inYes

16 – 74 Above £5,824 but below £10,000

Entitled workers 16 - 74 Up to £5,824 Have a right to join No

*SPA – State Pension Age

Minimum contribution requirements

Employer Pays Employee Pays* Total

Up to 5th April 2018 1% 1% 2%

From 6th April 2018 to 5th April 2019 2% 3% 5%

From 6th April 2019 3% 5% 8%

Based on Qualifying Earnings (total earnings between £5,824 and £43,000)

I*inclusive of tax relief

Alternative contribution options

• Pensionable earnings:- Set 1 basic pay- Set 2 basic pay where it represents 85% of total pay- Set 3 total pay

Employer Pays Employee Pays Total

Set 1 4% 5% 9%

Set 2 3% 5% 8%

Set 3 3% 4% 7%

Communications to workers

• Optional pre–staging date announcement• Statutory postponement notice if applicable • Statutory assessment outcome communications• Enrolment pack from pension supplier with opt-out instructions

Additional communications could include:- Staff Presentations- Webinars- Posters- Payslip Inserts

AE compliance in practice

• Assessments will need to be conducted each pay period • Recorded and evidenced• Correct contributions deducted• Pension reports sent to pension supplier• Statutory communications sent to workers• Options for managing compliance include:

- Payroll- Pension Supplier - 3rd Party

Ongoing employer duties

• Completion of your declaration of compliance• Agreeing a new joiner process • Managing opt-in and opt-out requests

Communications will need to be issued when:- New employees join the payroll- Employees on the payroll turn 22 and become eligible - Employees whose earnings increase due to a pay spike

Future governance and oversight

• Annual review of the pension scheme• Re-enrolment • Triennial Declaration of Compliance

Pension Changes

2016 pension update

2015 Autumn Statement

2016 Budget Q & A

Pension Freedom and Choice

• Introduced on 6th April 2015

• Full access to pension funds

• £4.35bn paid out in cash lump sum payments by quarter of a million people between April 2015 and March 2016

• Information and guidance provided by Pension Wise

Pension Freedom and choice

Take up to 25% of your pension savings

tax free and….

Withdraw your cash in stages, with 25% of each withdrawal tax free and the remaining 75% taxed as if it were income

OR

convert some or all of the rest as a taxable lump sum

convert some or all of the rest into taxable income

2015 Autumn Statement

• Full state pension increases to £119.30 a week

• AE phasing contribution dates to be delayed for six months to bring into line with tax years

• High earners tapered annual allowance

• Lifetime allowance to reduce to £1m

2016 Budget

• Hold on reform of pension tax relief

• No changes to salary exchange arrangements

• Pension information and advice

• Pension Dashboard

Lifetime ISA

• Starts 6th April 2017

• Tax / exempt / exempt approach

• 25% Government bonus, equivalent to basic rate tax relief

• Only for adults under 40

• Up to £4,000 a year (18-50)

• Contributions count towards ISA limit

• Funds can be access after 12 months for first time property purchase

Summary

Overview of employer duties

and AE in practice

Pension Freedoms and

impact of Budget

Questions & Answers

Where can you get more information

Lucas Fettes auto-enrolment helpline – 0345 357 8910

http://www.easyasae.co.uk

Questions and Answers

Important Notes

This presentation has been prepared based on our current understanding of UK taxation, Law and HMRC Practice.

Lucas Fettes & Partners (Financial Services) Limited is an Independent Financial Adviser authorised and regulated by the Financial Conduct Authority

(FCA) FCA no. 146279.

Please note, the value of investments can fall as well as rise in value therefore it may not always be possible to receive back the full amount invested. Past performance is not necessarily a guide to future returns and investments of

this nature should be considered as medium to long term