automatic enrolment - dispelling the myths

DM2652688 v1D This presentation remains the property of The Pensions Regulator. The content of these slides should not be altered in any way.

Automatic Enrolment - dispelling the myths

Rebecca Woodley

Industry Liaison Manager

Ken Tymms

Industry Liaison Manager

Neil Esslemont

Head of Industry Liaison

December 2013

The information we provide is for guidance only and should not be taken as a definitive interpretation of the law.


Since the recording of this webinar “registration” is now referred to as “declaration of compliance”.

Automatic enrolment – Declaration of Compliance (registration)


Dispelling common myths - I

Now

• Nominate a point of contact

• Know your staging date and develop a plan

Between now and staging

• Assess your workforce

• Review your pension arrangements

• Communicate the changes to all your workers


These are the common myths by topic:

• Nominate a point of contact Nominating a point of contact is the same as the declaration of compliance

(registration).

The nominated contact is responsible for complying with the automatic enrolment duties.

• Know your staging date and develop a plan Staging dates are based on current employee numbers.

If you use a different PAYE your staging date changes.

Another company’s PAYE will not affect your staging date.

Postponement delays the staging date.

Now


Nominating a point of contact - I

Myth:• Nominating a point of contact is the same as declaration of compliance

(registration).

Reality:• Nominating a contact is NOT the same as the declaration of compliance

(registration)!!

• You can enter the nominee’s contact details at: https://forms.tpr.gov.uk/workplacepensionsreform/nominate.aspx

• If you nominate a colleague – please tell them.

• You will need the “letter code” found in the top left of the letter from TPR.

• If you don’t have the letter or can’t find the code, contact our Help Desk at: www.tpr.gov.uk/contact-us.aspx


Nominating a point of contact - II

Myth:• The nominated contact is responsible for complying with the automatic

enrolment duties.

Reality:• Complying with the automatic enrolment duties remains the responsibility

of the employer.

• The nominated contact receives our regular emails and letters at key stages to keep you on track.


Staging Dates - I

Myth:

• Staging dates are based on current employee numbers.

Reality:

• The Staging Date is not based on current employee numbers.

• It is based on the size of the largest PAYE scheme the employer was using as of 1st April 2012.

Any subsequent changes in PAYE size or usage have no effect on the Staging Date.

• You should use our Staging Date tool. You will need all the PAYE reference(s) used by the employer as of

1stApril 2012; enter all PAYEs and the earliest date applies to that employer.


Staging Dates - II

Myth:• If you use a different PAYE your staging date changes.

Reality:

• If a company, ABC Ltd, had 3 PAYE references on the 1st April 2012 and the earliest staging date was 1st January 2014, and on 1st April 2013, ABC chose to put all employees in a completely different PAYE, what would happen? The staging date would remain 1st January 2014. If ABC was acquired by another company, the staging date would also

remain the same, as a change of ownership does not alter the staging date of an employer.

• Where the employer has no workers on their staging date, the employer duties will not apply on that date.


Staging Dates – III

Myth:• Another company’s PAYE will not affect your staging date.

Reality:

• If, as of 1st April 2012, one or more persons were paid by an employer using another company’s PAYE, this could determine their staging date.

• For example,

In March 2012, one employee, Eddie, left ABC Ltd to join a sister company XYZ, but XYZ used ABC’s PAYE reference to pay Eddie.

If, as of 1st April 2012, this PAYE was larger than all of XYZ’s PAYEs, it would determine XYZ’s staging date.

So, if this PAYE had 300 people (staging Feb 2014), but XYZ’s largest PAYE had 59 people (staging Nov 2014), XYZ would stage on Feb 2014.


Staging Dates – IV

Myth:• Postponement delays the staging date.

Reality: • Postponement suspends the duty to assess workers and automatically

enrol eligible jobholders.

Other duties will still apply, as the employer would have to:

i) Issue Postponement notices to all staff postponed at staging within one month (within 6 weeks from 1st April 2014);

ii) Enrol any Jobholders who Opt In during Postponement into an automatic enrolment pension scheme;

iii) Enrol any Entitled Workers who want to Join a pension scheme;

iv) Decide what actions to take in relation to any new workers who join during the postponement period (i.e. to Postpone or assess them).


Between now and staging


• Assess your workforce

Workers with fixed or enhanced protection do not have to be automatically enrolled.

• Review your pension arrangements

A qualifying scheme can always be used for automatic enrolment.

An existing scheme can always be made a qualifying scheme.


Assessing your workforce

Myth:• Workers with (HMRC’s) Fixed or Enhanced Protection do not have to be

automatically enrolled.

Reality:• Fixed or Enhanced Protection does not exempt a worker from automatic

enrolment.

• An employer may not even know which of their workers have Fixed or Enhanced Protection.

• HMRC has written to those with Enhanced Protection to advise them of the consequences of automatic enrolment and the actions they may need to take.

• This is also explained as part of the process for applying for Fixed Protection.

• HMRC guidance is: “if you have either Enhanced or Fixed Protection and don't opt out of the pension scheme within one month of automatic enrolment you'll lose your protection”.


Review your pension arrangements - I

Myth:• A qualifying scheme can always be used for automatic enrolment.

Reality:• Existing active members of a qualifying scheme do not need to be enrolled

into an automatic enrolment scheme.

• But an automatic enrolment scheme must be a qualifying scheme and there should be no barrier to automatic enrolment into the scheme.

• For example, there may be terms in the pension scheme rules that require workers to choose a fund or sign a contract:

These are barriers, as they require a worker to do something before active membership can take place. An automatic enrolment scheme must allow a worker to be enrolled without having to do anything.

• It is not permitted for the employer to issue statutory Opt Out notices or handle Opt Out requests themselves - the scheme provider has to do this.


Review your pension arrangements - II

Myth:• An existing scheme can always be made a qualifying scheme.

Reality:

• An existing scheme’s rules / contribution rates may mean it is, or can be deemed, a qualifying scheme (eg with Self Certification).

• If not, it may be possible to change the scheme rules to make it a qualifying scheme or an automatic enrolment scheme, but it may not be possible†.

• With the exception of NEST, pension providers may not be obliged to accept your workers into a scheme.

• You should talk to your pension scheme provider to check.

Note that NEST have a Public Service Obligation to accept all employers who need a scheme for automatic enrolment – but don’t leave it too late.

† See the Employers Detailed Guide 4 - Pension Schemes


FAQs – now and between now and staging


Nominating a contact FAQs

Q 1. Can a third party, such as an IFA, be the nominated contact?

A Yes, if the agent has been given the authority to act on the employer’s behalf.

Q 2. How many contacts can be nominated?

A The Pensions Regulator will write to the latest nominated contact.

So, if that person leaves your organisation another person should be nominated.


Staging date FAQs

Q 1. How can an employer find out their staging date?

A Use TPR’s Staging Date Tool or, if available, refer to TPR’s letter.

Q 2. What should an employer do if they receive more than one letter from TPR with different staging dates?

A If an employer has more than one PAYE scheme, use TPR’s Staging Date Tool and enter all PAYE references (earliest date applies) - or contact TPR.


Dispelling common myths - II

At staging and beyond

• Automatically enrol your eligible jobholders

• Declaration of compliance (registration)with the regulator and keep records

• Contribute to your workers’ pensions


At staging and beyond


• Automatic enrolment Qualifying Earnings are the same as pensionable earnings.

The Pay Reference Period is the same as the pay frequency.

Postponement can only be used once per worker.

Workers will know whether they are requesting to Opt In or Join a pension.

Workers can ask to opt out before they have been automatically enrolled.

• Declaration of compliance (registration) You cannot start the declaration of compliance (registration) process until

you have staged.


Qualifying Earnings

Myth:

• Qualifying Earnings are the same as pensionable earnings.

Reality:

• Pensionable earnings may or may not the same as Qualifying Earnings.

• Pensionable earnings will be defined by the pension scheme rules.

• Qualifying Earnings† is a band of earnings containing these pay elements:• salary/wages, commission, bonuses, overtime and certain

statutory payments.

• Qualifying Earnings must be used to assess a worker’s category (i.e. Eligible Jobholder, Non-Eligible Jobholder or Entitled Worker).

• For more information view our webinar on ‘Identifying your worker and calculating pension contributions’:

www.tpr.gov.uk/press/webinar-identifying-workforce-calculating-minimum-contribution.aspx

† As defined in Section 13 of the Pensions Act 2008


Pay Reference Periods

Myth:• The Pay Reference Period (PRP) is the same as the pay frequency.

Reality: • The PRP is the “period of time by reference to which the employer pays

the worker their regular wage or salary”.

• This may or may not be the same as the pay frequency. For example, if a worker is paid monthly, but paid for work in every complete week before payroll cut off, then the PRP pattern will be 4, 4, 5, 4 weeks.

• However, as an option, employers may use a new alternative definition of a PRP for assessing the eligibility of any given group of workers based on the usual interval between payments of their pay, with the start date of the PRP being aligned to tax weeks or months. Or, if the usual frequency is less than a week or there is no regularity, then the

employer may use a one tax week PRP.


Postponement

Myth:• Postponement can only be used once per worker.

Reality: • Each worker may be postponed more than once, at different times.

• Can be from 1 day up to max of 3 months - and can vary by individual.

• Employer must assess on the last day of postponement: Automatically enrol eligible jobholders or, if not eligible at that point,

monitor each future pay reference period. If a worker triggers automatic enrolment again at a later date (e.g. they

turn 22 and earn above the eligibility trigger) postponement can be used again.

• But only one postponement at a given time per worker you cannot overlap two postponement periods for a worker.


Opting In

Myth:• Workers will know whether they are requesting to Opt In or Join a pension.

Reality: • A worker may not know what category they are (Entitled Worker, Non-

Eligible Jobholder, Eligible Jobholder) or remember what their rights are.

• Irrespective of what request (Join/Opt In) is made, an assessment should be made, based on their age and earnings in the Pay Reference Period in which the request to Opt In or Join is received.

• Workers assessed as a Non-Eligible Jobholder (or Eligible Jobholder during Postponement) will be “Opted In” to an automatic enrolment scheme.

• Workers assessed as an Entitled Worker will “Join” a pension scheme.


Opting Out

Myth:• Workers can ask to Opt Out before they have been automatically enrolled.

Reality: • Workers automatically enrolled (or who have Opted In) may ‘Opt Out’.

• Early Opt Outs (before the Opt Out window starts) – are not allowed.

• A one calendar month Opt Out window starts on the later of two dates: the date the worker becomes an Active Member of the pension

scheme; or the date the jobholder is given the enrolment information.

• For a valid Opt Out, the worker will get a full refund of all contributions and membership will be unwound.

• After the Opt Out Window has closed, the worker may still request to cease membership of the pension scheme (under the scheme rules).


Declaration of Compliance (registration)

Myth:• You cannot start the declaration of compliance (registration) process until

you have staged.

Reality:

• You can complete many things in advance except information about your workforce.

• You cannot complete the process until you have staged and all Postponements applied at the staging date have finished.

• You need your 10 digit letter code and your PAYE reference to use the online gateway.

For further information and access to a video on how to complete declaration of compliance (registration) go to:

• http://www.tpr.gov.uk/employers/automatic-enrolment-registration.aspx

• https://www.autoenrol.tpr.gov.uk


FAQs – at staging and beyond


Pay Reference Periods FAQs

Q 1. What is the Pay Reference Period (PRP) if the worker is paid for less than a week’s work?

A Some workers (e.g. Saturday-only shop assistants) could be paid once per week for a single day’s work. As you cannot have a PRP of less than one week, employers can choose to use a PRP of one tax week.

Q 2. A worker has a pay frequency of one month. However, they are paid for every complete week they have worked. What is the PRP?

A Some months they will be paid for 5 weeks work and other months for 4 weeks. The employer can use a 4,4,5 pattern PRP – or use a tax month PRP.

Q 3. If a worker meets the requirements and is automatically enrolled, but in a subsequent PRP no longer meets the eligible jobholder criteria, should they be taken out of the pension scheme?

A No, once a worker has been enrolled they will remain a member unless they Opt Out or cease membership of the pension scheme.


Pension schemes FAQs

Q 1. Does a pension scheme which has contributions based on Qualifying Earnings (QE) have to use Self Certification?

A No, Self Certification is only required for schemes that have a definition of pensionable salary contributions that is not based on Qualifying Earnings.

Q 2. Can Entitled Workers who request to join a scheme and Non Eligible Jobholders who request to Opt In be put into the same pension scheme?

A Yes, an employer can choose to put them in the same scheme with the same contribution rates and can contribute to an Entitled Worker’s pension if they wish.

Q 3. Can I use more than one pension scheme to meet my automatic enrolment duties?

A Yes, an employer can use as many automatic enrolment schemes as they wish to carry out their duties and can have multiple qualifying schemes.


Postponement FAQs

Q 1. How long can the assessment of workers be postponed?A Between 1 day and 3 months and can vary for different groups of workers.

Q 2. If postponement is used, what three duties still apply?A i) Issue Postponement notices, within one month, to all postponed staff,

including new joiners (within 6 weeks from 1st April 2014).

ii) Enrol any jobholders who Opt In during Postponement into an automatic enrolment pension scheme.

iii) Enrol any Entitled Workers who want to Join a pension scheme.


Opting Out FAQs

Q 1. Can the administration of Opting Out be delegated to the employer if the scheme rules allow it and the employer is a trustee?

A Only if the jobholder is an active member of a scheme which is an occupational pension scheme and that scheme has, in its trust instrument, expressly delegated all of its administrative functions to the employer, then the jobholder may obtain an opt out notice from that employer.

Q 2. Could an employee Opt Out via the employer’s Flexible Benefits system?

A Yes, but the flex system provider would need to have the appropriate legal agreement in place with the pension provider to allow them to act as the scheme provider’s agent and the perception of the worker should be that the Opt Out process is handled by the pension scheme provider and not by the employer (so Opt Out screens would need to be suitably branded).


Declaration of compliance (registration) FAQs

Q 1. How will an employer know what information is required for declaration?

A TPR has produced a checklist. Please see the Useful Links slide.

Q 2. What will I need to do to use the online gateway for declaration?

A You will need to get a Government Gateway user ID.

If you already have one (e.g. for HMRC online) you may be able to use this.

If you are declaring more than one employer, select ‘acting on behalf of an employer’ and this will allow you to make multiple declarations with a single user ID.

Any data added will be saved and can be accessed at a later date.


Useful Links

• Automatic enrolment guidance and tools www.thepensionsregulator.gov.uk/employers.aspx

• Planning for Automatic Enrolment www.tpr.gov.uk/employers/planning-for-automatic-enrolment.aspx

• Know your workforce www.tpr.gov.uk/employers/know-your-workforce.aspx

• Detailed guides for Employers (and pension professionals): www.tpr.gov.uk/doc-library/automatic-enrolment-detailed-guidance.aspx

• Information about declaration of compliance (registration) and employer checklist: www.tpr.gov.uk/employers/registration.aspx www.tpr.gov.uk/docs/automatic-enrolment-online-registration-checklist.pdf


Questions?


Automatic enrolment

We are here to help!

Contact us at www.tpr.gov.uk/contact-us.aspx

Subscribe to our news by emailwww.tpr.gov.uk/subscribe.aspx

The information we provide is for guidance only and should not be taken as a definitive interpretation of the law.


Additional Slides

An introduction to Automatic Enrolment


Myth Reality

1. Nominating a point of contact is the same as declaration of compliance (registration).

1. Nominating a point of contact and declaration of compliance (registration) are separate processes.

2. The nominated contact is responsible for complying with the automatic enrolment duties.

2. The employer is responsible for complying with the automatic enrolment duties.

3. Staging dates are based on current employee numbers.

3. Staging dates are based on the size of the largest PAYE scheme the employer was using as of 1st April 2012.

4. If you use a different PAYE your staging date changes.

4. Changes in the size or usage of PAYE schemes now have no effect on your staging date.

5. Another company’s PAYE will not affect your staging date.

5. If, as of 1st April 2012, one or more persons were paid by an employer using another company’s PAYE, this could determine their staging date.

6. Postponement delays the staging date. 6. Postponement does not change the Staging Date (and other duties still apply in this period).

Common Myths – now


Myth Reality

1. Workers with HMRC Fixed or Enhanced protection do not have to be automatically enrolled.

1. Fixed or Enhanced protection does not exempt workers from automatic enrolment.

2. An existing scheme can always be made a qualifying scheme.

2. The scheme rules may prevent it from being a qualifying scheme.

3. A qualifying scheme can always be used for automatic enrolment.

3. Not all pension providers will allow the use of a scheme for automatic enrolment and/or the scheme rules may prevent a qualifying scheme being used for automatic enrolment.

Common Myths – between now and staging


Common Myths – at staging and beyond

Myth Reality

1. Qualifying Earnings are the same as pensionable earnings.

1. Pensionable earnings are defined in the scheme rules and may not be the same as Qualifying Earnings.

2. The Pay Reference Period (PRP) is the same as the pay frequency.

2. The PRP may be the “period of time by reference to which the employer pays the worker their regular wage or salary” - or can be based on tax weeks/months.

3. Postponement can only be used once per worker.

3. Postponement can be used more than once per worker, but at different times.

4. Workers will know whether they are requesting to Opt In or Join a pension.

4. Workers will be assessed on receipt of their request and the Opt In or Joining process started depending on their worker category.

5. Workers can ask to Opt Out before they have been automatically enrolled.

5. Workers must be an active member of the scheme before they can Opt Out.

6. You cannot start the declaration of compliance (registration) process until you have staged.

6. You can start the declaration of compliance (registration) process even before staging and any data entered will be saved.


Staging date - useful information

• Employers should not rely on any estimate of their staging date.

• You should use our Staging Date tool. You will need all the PAYE reference(s) used by each employer on 1stApril

2012; If more than one PAYE reference was used on 1st April 2012

enter all PAYEs into the tool and the earliest date applies to that employer.

• If the employer had less than 50 workers on 1st April 2012: The employer may choose to stage at a later designated date which will

not be before June 2015.

• An employer may bring their staging date forward, but may not delay† it: You must inform the Regulator at least one month in advance of the

new date; You must have an automatic enrolment pension scheme ready (and the

trustee or provider must agree to it being used from the earlier date).

† unless the employer had <50 workers on 1st April 2012


• As an option, employers may use an alternative definition of a Pay Reference Period (PRP) for assessing the eligibility of any given group of workers:

The new PRP definition is based on the usual interval between payments of their pay, with the start date of the PRP being aligned to tax weeks or months.

Or, if the usual frequency is less than a week or there is no regularity, then the employer may use a tax week PRP.

Monthly PRPs would run from the 6th to the 5th of each month.

Weekly (or weekly multiples) run in sequence from the 6th April each year. However, as a year does not contain a whole number of weeks, a change of PRPs† will need to be carried out each year (e.g. week 53).

Defining the PRP as the length of the pay frequency removes the problem of 4,4,5 week pay patterns - if the pay frequency is monthly (i.e. the PRP will be one month).

• Employers may continue to use the existing definition of a PRP if they wish or use the new definition for some, or all, of their workers.

New Pay Reference Periods


• Employers MUST complete declaration with TPR to confirm they have complied.

• Deadline is 5 months after Staging and 2 months after each re-enrolment date.

• Employers may receive a penalty fine for declaring late.

• Employers will need to provide: employer details (name, address, email, all PAYE refs used); details of pension scheme(s) used to comply with the employer duties

(e.g. scheme name, address, EPSR, pension scheme registry number); the last day of any postponement period applied at staging; number of workers employed on the staging date

(or on the last day of any postponement periods); number of eligible jobholders automatically enrolled into each scheme; number of workers already active members of a qualifying pension scheme

on the staging date; and the number of eligible jobholders subject to the Transitional Period.

declaration of compliance (registration) - additional information


Where pensionable salary is different to Qualifying Earnings - Self-Certification during phasing

Up to 1st Oct 2017

1st Oct 2017 to 30th Sept

2018

From 1st Oct 2018

Pensionable Salary(Basis of

% Contributions)

Set 1

(Tier 1)

2% Employer/ 3% Total



Scheme Definition

(if >= basic pay from £1)

Set 2

(Tier 2)




85% of Total Pay (scheme average)

Set 3

(Tier 3)




100% of Total Pay

automatic enrolment - dispelling the myths

Documents