Transcript PENSIONS AUTO-ENROLMENT - Recruitment International

PENSIONS
AUTO-ENROLMENT
Neil Bhan
DAC Beachcroft LLP
5 March 2013
Agenda
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Overview of duties for employers
Assessing your workforce
Your obligations
What type of pension scheme?
Contributions
Required information & communications
Automatically enrolling, opting out, opting in, reenrolment
 Reducing costs
Overview of new duties for employers
 New laws came into effect from 1 October 2012
 Auto-enrolment applies to eligible jobholders
 Qualifying pension scheme / automatic enrolment
scheme
 Who is affected? Employers required to contribute
 Opt out only possible after being auto-enrolled
 Date changes come into effect: your staging date
Overview of new duties cont.
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Administer a re-enrolment process every 3 years
Administer and process opt-out notices
Pay refunds if jobholder opts out
Adhere to safeguards to ensure compliance
Your staging date
 Planning for auto-enrolment stems from knowing your
staging date
 Based on number of people in your PAYE scheme on 1
April 2012
 Planning for implementation will take time so the earlier
the better
Assessing your workforce
 Four main groups:
 eligible jobholders
 non-eligible jobholders
 entitled workers
 others (“non-entitled workers”)
 Thorough assessment of workforce required - this
determines what you are required to do to comply with
your employer duties
Eligible jobholders
 Your employees or workers who:
 work (or ordinarily work) in the UK;
 are aged at least 22 and under state pension age;
and
 are paid “qualifying earnings”
 Qualifying earnings = earnings above automatic
earnings threshold (currently £8,105)
 Automatic enrolment date (AED) = date satisfies above
 Earnings includes bonuses, overtime, statutory
maternity, paternity or adoption pay
Non-eligible jobholders
 Your employees or workers who:
 work (or ordinarily work) in the UK;
 are aged between 16 and under 75; and who either:
 have qualifying earnings (currently) between
£5,564 and £8,105, or
 earn more than £8,105 of qualifying earnings but
are aged:
 between 16 and 21; or
 between state pension age and 74
Entitled workers
 Your workers who:
 work (or ordinarily work) in the UK;
 are aged between 16 and 74; and
 earn below the qualifying earnings threshold (i.e.
currently £5,564)
 Non-entitled workers
 Anyone who doesn’t fall within the 3 other categories
Your obligations to eligible jobholders
 Ensure all are enrolled into a qualifying scheme
 Determining who are already in a qualifying scheme
and automatically enrolling those who are not into an
automatic enrolment scheme
 Pay contributions on qualifying earnings (currently on
all earnings between £5,564 and £42,475)
 Provide prescribed information about the pension
arrangements and employer duties
 Automatically re-enrol any eligible jobholders not
enrolled into qualifying scheme every 3 years
Your obligations to non-eligible
jobholders
 Provide prescribed information about the pension
arrangement and right to opt in
 Allow membership of scheme if individual opts in
 Membership on same basis as eligible jobholder i.e.
employer obliged to pay contributions on qualifying
earnings
Your obligations to entitled workers
 Provide prescribed information about the pension
arrangement and right to join
 Allow membership of scheme if individual asks to join
 No employer contributions required
Your obligations to all workers
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Keeping records
Registering with the Pensions Regulator
Providing notification if using a waiting period
Providing prescribed information about the pension
arrangement
 Adhering to safeguards to ensure compliance
Issues in assessing your workforce
 This will take time, especially if you have a large or
complicated workforce
 Who are “workers”?
 broad definition – covers permanent and temporary
workers
 can include agency workers
 may include casual workers or on zero hours
contracts
 “works (or ordinarily works) in UK” – look at who travels
or is seconded to work in different countries?
Issues in assessing your workforce
 Thresholds for age and earnings
 ages will constantly change and earnings may
fluctuate
 data challenges - your systems need to cope with
the triggers in your duties
 Qualifying earnings
 you use a pay reference period to determine if
someone is eligible or not
 these will be reviewed annually by the Government
and may change
Reviewing your pension arrangements
 You can only auto-enrol eligible jobholders into an
automatic enrolment scheme:
 a qualifying scheme i.e. tax registered occupational
or personal pension scheme which is able to meet
minimum requirements; and
 meets automatic enrolment criteria i.e. no barriers,
minimum level of contributions or benefits
 Do you have an existing scheme you can use or adapt?
 Do you need to set up a new scheme?
Which scheme?
 No right or wrong scheme to select – depends on
make-up of your workforce
 Do you want different schemes for different categories
of workers?
 Do you want to move workers from one scheme to
another as career and earnings progress?
Contributions
 Must pay minimum level of contributions
 Exact amount depends on type of pension scheme
used
 DC schemes - minimum contribution levels phased in:
 year 1 to 5 - employer and employer contribution
each 1% of qualifying earnings*
 year 6 – employer 2% / employee 3%
 year 7 onwards - employer 3% /employee 5%
*self certifying - contributions also phased in similarly
Prescribed information
 Depends on category of worker
 Eligible jobholders:
 they have been, or will be, automatically enrolled, or
(if applicable) are a member of a qualifying pension
scheme
 if being automatically enrolled:
 what this means for them
 they can opt out
 Generic statement re finding info about pensions
and retirement saving + scheme details
Prescribed information cont.
 Non-eligible jobholders:
 they have right to opt in to automatic enrolment
scheme
 what it means to exercise right to opt in
 if do opt in, must be provided with same autoenrolment information as for eligible jobholders
 Entitled workers:
 they have right to join a pension scheme
 what it means if they exercise their right to do so
Prescribed information cont.
 All workers:
 if you are operating a 3 month waiting period, you
must tell all workers you are doing so within 7 days
of start of waiting period
 All information to be provided within prescribed
timeframes:
 relevant enrolment information to be provided within
1 month of AED/following expiry of waiting period
 within 2 months of your staging date, to tell workers
they are already a member of qualifying pension
scheme
Waiting periods
 Employers may elect up to a 3 months’ waiting period
before a jobholder becomes entitled to an AED
 Waiting periods can be used in 3 situations:
 from your staging date (i.e. jobholder already
employed at that date)
 from 1st day of jobholder’s employment with you
 from 1st day jobholder already in employment
becomes eligible for auto-enrolment
 Waiting periods can vary between workers/groups
 Note: jobholder in waiting period can voluntarily opt in
to automatic enrolment scheme during waiting period
Communications with employees
 Developing your communications strategy will take time
 Information must be provided in writing – includes
sending it by email but providing internet/intranet site or
displaying poster not sufficient
 Communications are to be neutral
 DWP has published “employer toolkit” i.e. examples of
employee communications
 Your processes must be robust enough to ensure right
information sent to right individual at right time
Automatically enrolling your jobholders
 At jobholder’s AED or end of waiting period, must
become an active member of a qualifying pension
scheme
 You must start calculating contributions and deducting
from pay with effect from AED
 Must enrol non-eligible jobholders who have opted-in
within 1 month of enrolment date
Opting out
 Jobholder who has become active member has 1
month to opt out of active membership
 Runs from later of:
 date jobholder became active member; and
 date jobholder given enrolment information
 Notice to opt out must be provided by scheme and
contain certain information (Pensions Regulator sample
wording)
 Entitled to full refund within 1 month from date you are
given valid opt-out notice (employer refund also)
Opting in
 Individual can opt-in in 3 circumstances:
 is a non-eligible jobholder
 had opted out after being auto-enrolled previously,
but changed mind
 eligible jobholder during waiting period
 Entitled worker has right to join
 Individuals only entitled to submit 1 opt-in notice in any
12 month period
Re-enrolment processes
 You will be required to automatically re-enrol eligible
jobholders in qualifying scheme every 3 years after date
you became subject to employer duties
 Doesn’t apply to jobholders who opted out in 12 months
leading to re-enrolment date
 6 month window of 3rd anniversary of staging date (or
re-enrolment exercise) to re-enrol
 Same processes and information applies to reenrolment as to auto-enrolment
 Your processes will need to be adapted to allow for this
Planning and time required
 Some matters will require decision making across
different functions e.g. HR, Finance, Operations etc.
 Need to understand costs of compliance
 What is best model: lowest cost v administration ease
 Assess your internal processes – what do you need to
do regarding your HR & payroll processes to comply
 Assess your workforce
 Develop your communications strategy
 How will records be kept and by whom
 Implement your pension arrangements/changes req’d?
Any questions?
Neil Bhan
Partner - Employment and Pensions Group
DAC Beachcroft LLP
100 Fetter Lane, London
EC4A 1BN
T: +44 (0)20 7894 6512
M: +44 (0)7738000060
E: [email protected]