Transcript Document

Workplace Pension Reform:
an introduction to
automatic enrolment
The government are introducing major
changes to workplace pensions. Make sure
you know how you will be affected with this
handy guide.
What is workplace pension reform?
Workplace pension reform (WPR) is the new legislation that
states workers need to be automatically enrolled on a
nominated pension scheme, when they meet certain criteria.
Automatic enrolment is the mechanism behind this process. A
common belief is that automatic enrolment is workplace
pension reform, this is not the case.
Why is it being introduced?
People are living longer, with healthier lifestyles; as a result the
ratio between the workforce and those at a pensionable age is
decreasing. People are also planning and saving less for their
retirement. The current state pension cannot sustain this
change so as a result, workers are being encouraged to save
for their retirement through workplace pension schemes.
Leading industry experts suggest you should start
preparing for Auto Enrolment 18 months before your
staging date, so you should already be thinking about the
next steps you need to take!
In 1901 there were 10 workers for every 1
pensioner. In 2010 this had dropped to 3
workers to every pensioner. By 2050 it is
estimated to have dropped to just 2 workers
to every pensioner.
Call 0843 357 1832, or visit iris.co.uk to see how we can help you
Key terms and definitions
• Automatic Enrolment (AE) – The process in which Eligible Jobholders, who are
not already a member of a qualifying scheme, must be automatically enrolled
into a qualifying pension scheme.
• Department for Work & Pensions (DWP) – Policy owner and responsible for
enabling and coordinating activity for the programme. Defines the
communication required between employers and employees.
• NEST (National Employment Savings Trust Corporation) – A pension
provider available to all employers who want to use it. NEST is a workplace
pension scheme designed for automatic enrolment that is available to any UK
employer regardless of the organisations’ size.
• Opt In – A jobholder has the right to ‘Opt In’ to an automatic enrolment
scheme, unless they are:
• An active member of a qualifying scheme with that employer.
• An eligible jobholder for whom the employer has an automatic
enrolment duty.
• Opt Out – Eligible jobholders may choose to ‘Opt Out’ after they have been
automatically enrolled. Non-eligible jobholders who have opted in may choose
to ‘Opt Out’ after they have been enrolled. Workers who have been enrolled
under contractual enrolment and entitled workers who have asked to join a
scheme do not have the right to choose to ‘Opt Out’. If they want to leave the
scheme, they must cease membership in accordance with the scheme rules.
• Eligible jobholder
• Aged between 22 and the state pension age (SPA)
• Working in the UK
• Earning above the minimum earning threshold (currently £8,105)
• Non-eligible jobholder
• Aged between 16 and 21 or SPA and 74
• Working in the UK
• Earning above the minimum earning threshold
OR
• Aged between 16 and 74
• Working in the UK
• Earning above the lower earnings threshold (currently £5,564) but below
the minimum earning threshold
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Key terms and definitions
• Entitled workers
• Aged 16-74
• Working in the UK
• Earning below the lower earnings threshold
• ORIGO – An ecommerce standards and services body for the UK financial
services industry. Represents several pension providers.
• Postponement Date – Postponement allows the employer to postpone the
automatic enrolment process for up to 3 months. This can be for:
• All employees (can only be postponed at staging date)
• Selected individuals (can be postponed at staging date or when they
trigger automatic enrolment)
• Groups of employees e.g. new starters (can be postponed at staging
date or when they trigger automatic enrolment)
• Qualifying Earnings – The earnings used to identify whether an employee is an
eligible jobholder or a non-eligible jobholder and their level of contributions.
• When a worker is paid in arrears, the employer considers what is due to
be paid in this period regardless of what period it is earned.
• Includes: salary, wages, commission, bonuses, overtime, SSP, SMP, OSPP,
ASPP, SAP.
• Staging Date – The date when businesses must start the automatic enrolment
process
• The Pensions Regulator (TPR) – The UK regulator of work-based pension
schemes. Responsible for auditing companies ensuring that employers are
compliant with the WPR legislation
• The Pensions Advisory Service – An independent non-profit organisation that
provides free information and guidance on the whole spectrum of company,
personal and stakeholder schemes.
Call 0843 357 1832, , or visit iris.co.uk to see how we can help you
What do I need to do to prepare
for automatic enrolment?
1) Know your staging date – you can find this out on page 7
2) Assess your workforce for eligibility
3) Review your current pension arrangements
4) Communicate the changes to all your workers
5) Automatically enrol your ‘eligible jobholders’
6) Register with The Pensions Regulator and maintain records
7) Contribute to your workers’ pensions
8) Look our for up and coming guides we will be releasing or
contact us to see how we can help you prepare for automatic
enrolment
Call 0843 357 1832, , or visit iris.co.uk to see how we can help you
What is a staging date and how
is it determined?
• Workplace pension reform is being rolled out in stages, known as “Staging Dates”
• A small employer (with fewer than 50 workers as of 1st April 2012) who has a staging date
on or before 1st April 2015, may choose to move their staging date to a pre-prescribed
alternative date between August 2015 and April 2017
• Staging for larger employers has already begun – with the largest employers staging from
October 2012
• Staging date is based on the PAYE data provided to The Pensions Regulator (TPR) by HMRC
on 1st April 2012 – employers will then be contacted by TPR 12-18 months before their
staging date and then again 3 months before their staging date
• Employers may not know their PAYE count, as it is not necessarily equal to the number of
employees
• Employers may have an earlier staging date if they have at least one person paid under a
PAYE scheme larger than the employer’s “main PAYE” (e.g. parent company’s PAYE
reference)
Can I move my staging date?
• Employers may bring forward their staging date to be seen as forward thinking, to offer as
a benefit package for employees or to align with certain periods in their payroll calendar
(e.g. If staging date is at busiest time, bringing it forward can alleviate some pressure)
• Employers can bring forward their staging date but once it has been moved forward it
cannot be moved back
• To bring the staging date forward employers must have an existing staging date and must
have contacted a pension scheme that can be used to comply with employer duties.
• If you bring your staging date forward, the new date must be the 1st of the month and you
must take the following steps :
• Obtain an agreement that the selected scheme can fulfil the duties from the new
staging date
• Agreement must be obtained from: the trustees or managers, for occupational
pension schemes, or the provider, for personal pension scheme, or the scheme
administrator as registered with HMRC
• Notification must be in writing and TPR must be notified at least one calendar
month before the new staging date
Call 0843 357 1832, , or visit iris.co.uk to see how we can help you
When is my staging date?
As previously mentioned, your staging date depends on the number of
people on your largest PAYE scheme as of 1st April 2012.
To ensure you know your correct staging date please use the link below or
contact The Pensions Regulator customer support.
http://www.thepensionsregulator.gov.uk/employers/tools/staging-date.aspx
A basic summary is shown in the tables below.
No. Staff in Largest PAYE
Staging Date
120,000 or more
50,000 - 119,999
30,000 - 49,999
20,000 - 29,999
10,000 - 19,999
6,000 - 9,999
4,100 - 5,999
4,000 - 4,099
3,000 - 3,999
2,000 - 2,999
1,250 - 1,999
800 - 1,249
500 - 799
350 - 499
250 - 349
160 - 249
90 - 159
62 - 89
61
60
59
58
54 - 57
50 - 53
40 - 49
30 - 39
Fewer than 30 (depends on the last 2
characters in PAYE reference number)
or New employer (depends on when
PAYE income first payable)
1st Oct 2012
1st Nov 2012
1st Jan 2013
1st Feb 2013
1st Mar 2013
1st Apr 2013
1st May 2013
1st Jun 2013
1st Jul 2013
1st Aug 2013
1st Sep 2013
1st Oct 2013
1st Nov 2013
1st Jan 2014
1st Feb 2014
1st Apr 2014
1st May 2014
1st Jul 2014
1st Aug 2014
1st Oct 2014
1st Nov 2014
1st Jan 2015
1st Mar 2015
1st Apr 2015
1st Aug 2015
1st Oct 2015
1st Jun 2015 to 1st Apr 2017
1st May 2017 to 1st Feb 2018
Call 0843 357 1832, , or visit iris.co.uk to see how we can help you
What is postponement?
Postponement allows the employer to postpone the
automatic enrolment process for up to 3 months. This can
be for:
• All employees (can only be postponed at staging date)
• Selected individuals (can be postponed at staging date or when
they trigger automatic enrolment)
• Groups of employees e.g. new starters (can be postponed at
staging date or when they trigger automatic enrolment)
Why would employers choose to use postponement?
• Bring the automatic enrolment process in line with their
payroll process.
• Provide a method of avoiding a spike in income for those who
would usually not qualify for automatic enrolment.
• Provide a method of leaving seasonal workers out from the
process.
• Some employers are using postponement to give themselves
more time to prepare.
Postponement Rules
• If an employer wants to use postponement they must issue
the employee with a tailored postponement notice or a
“General Notice”.
• The employer needs to decide on the ‘deferral date’.
• “General Notice A” can be used to serve all employees.
Call 0843 357 1832, , or visit iris.co.uk to see how we can help you
When can I use postponement?
Joe is a new employee. His
probation period is 3 months.
Can postponement be used for
new employees?
Postponement can be used in
this situation as long as it is
communicated to Joe.
Yes
I take on seasonal workers.
Can I use postponement?
Postponement can be
used in this situation as
long as it is
communicated.
Yes
I have already used
postponement for Joe. But I
have had to extend Joe’s
probation period. Can I use
postponement again?
Joe must be reassessed on the
last day of postponement, and if
he meets the criteria of an eligible
jobholder he must be
automatically enrolled.
No
Call 0843 357 1832, , or visit iris.co.uk to see how we can help you
How can we support you?
Leading industry experts suggest you should start preparing for
automatic enrolment 18 months before your staging date, so you
should already be thinking about the next steps you need to take!
HR consultants Towers Watson conducted a survey which highlighted:
“Market capacity for pension providers to support pension implementations will be
reached by May 2013”
“By the end of 2013, projects will be running at about seven time’s normal capacity”.
Automatic enrolment is complex – initial feedback tells us that the implementation
of these reforms is much more complicated than RTI legislation was!
We are developing a complete solution approach to help ensure you are fully
prepared for this legislative change. We will be regularly updating our website and
blog with news and advice, as well as our Twitter account - @IRISPayroll
We have also launched our “Pathway to Pension Reform and Auto Enrolment”
training seminars. These courses will educate you on workplace pension reform
and automatic enrolment, as well as giving you the steps you need to take to start
preparing your business.
For more information contact us on 0844 815 5700 or [email protected]
About IRIS
With 30 years' experience, the IRIS Software provides business critical software
and services to the UK SME sector and accountants in practice. More than 30,000
small to medium sized companies and 15,000 UK accountants rely on the IRIS
Software Group every day to run their business.
IRIS Software Group is the number one solution provider for RTI and its software
pays 14 per cent of UK businesses that operate under PAYE. All customers receive
the greatest choice of RTI payroll software and services managed under the
brands IRIS and Earnie. The company has over 95 per cent customer retention
across its core products.
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Call 0843 357 1832, , or visit iris.co.uk to see how we can help you