pension reform - people vision
DESCRIPTION
Pension reform - you need to know about it honestly!Great explanation on the new regulations.TRANSCRIPT
Workplace Pension Reforms – Doing nothing is not an option
Webinar with Alyson Pellowe (People Vision) and Simeon Adams
(Argentis Financial Management)
• Welcome • Participant
involvement• Questions: raise your
‘technological’ hand• Type in chat box
The story so far…
• Pension Reform is going ahead• No exemption for Small Employers• Auto-Enrolment July 2012 – September 2016• Staging date based on Employer size, but can be
brought forward• Employer must enrol staff into an automatic enrolment
scheme, with opt-out facility
Session Objectives
There are a number of key questions all employers want to know
• When do we have to have a scheme in place?
• Who do we have to enrol into the scheme?
• How much it is going to cost?• What are my duties/responsibilities?• Is there anything I can do to reduce
the costs?
How many staff have you
got and when is your staging date?
Timescales
Number of PAYE staff Staging Date
50,000+ Q4 2012
10,000 – 49,999 Q1 2013
4,000 – 9,999 Q2 2013
1,250 – 3,999 Q3 2013
500 – 1,249 Q4 2013
250 – 499 Q1 2014
90 – 249 Q2 2014
50 – 89 Q3 2014
< 50 Q3 2014 – Q1 2016
New Employers Q1 2016 – Q3 2016
Unless you are unlucky!
Employee group Employer requirements
Entitled WorkerEntitled Worker
Earnings under lower threshold (may be £5,715 or NI threshold - currently £7,228)
Must offer access to a pension scheme, but no requirement for employer to contribute
Non Eligible Job HolderNon Eligible Job Holder
Earnings between lower threshold and Income Tax threshold (£7,475 in 2011/12)
No automatic enrolment, but employer must contribute if individual asks to join
Non Eligible Job HolderNon Eligible Job Holder
Age under 22 or over state pension age and under 75
No automatic enrolment, but employer must contribute if individual asks to join
Eligible Job Holders Eligible Job Holders
All other employees
Must be automatically enrolled
Contribution bases
Employer minimum
Minimum total
Full pensionable earnings 4% 9%
Band earnings (P60 earnings £5,715 - £38,185)*
3% 8%
Full pensionable earnings, and at least 85% of payroll is pensionable
3% 8%
Full P60 earnings 3% 7%
*Based on 2010/11 earnings levels and National Insurance thresholds
Phasing-in period until October 2017
At least basic pay, from pound one. Basic pay is “the elements of pay that do not vary”.
Who is going to do this analysis?
What about phasing of contributions?
Employer Employee Tax Relief
Up to 10/2016 1.0% 0.8% 0.2%
10/2016 – 10/2017
2.0% 2.4% 0.6%
10/2017 onwards
3.0% 4.0% 1.0%
Contributions are based on total PAYE earnings between £5,715 & £38,185, increased in line with National Average Earnings, (2010/11 terms)
Waiting Periods
Recommendation
Employers be allowed to use a waiting period of up to three months before automatic enrolment
Individuals are allowed to opt in to the scheme during that time.
Employer Duties
Automatic EnrolmentEmployer Within 1 month1. Give information to the
pension scheme about the eligible jobholder
2. Give enrolment information to the job holder
3. Make arrangements to achieve active membership for the eligible job holder
Opt OutIndividual has 1 month1. Check notice2. Notify scheme3. Stop contributions4. Refund employee
payments5. Reclaim from scheme
Other Aspects
Deferral• Max 3 months• Must tell eligible jobholders in advance• They can choose to opt in during the period
Automatic Re Enrolment• Every 3 years• Same date for all staff• 3 month window either side of anniversary
What regulatory requirements are there?
• Employers must inform the Pensions Regulator about how they have met their obligations within 9 weeks of their staging date, and every 3 years after that
• Employers, pension schemes & pension providers will have to retain records for 6 years, including opt-outs
• Penalties as follows…
How many organisations do you think have been fined by the
regulator for non compliance to the stakeholder scheme?
Penalties
Compliance/unpaid contribution noticeStage 1 - Warning
Fixed penalty - £400Stage 2 – ‘Wake up call’
Escalating penalty
WorkersPenalty per day1-4 £505-49 £50050-249 £2,500250-499 £5,000500+ £10,000
Stage 3 – Persistent offenders
Penalties
Third parties
£400 fixed£200 per day escalating
Prohibited recruitment conduct
WorkersFixed penalty1-4 £1,0005-49 £1,50050-249 £2,500250+ £5,000
- A centralised occupational scheme
- Administered in private sector
- Low charges 1.8% upfront and 0.3% pa administration
- Limited investment choice - A small range of funds, including ethical & religious - ‘Target date’ approach rather than lifestyling
- Restrictions to help target scheme - Contribution limit £4,200 until 2017 - No transfers in or out until at least 2017
NEST (National Employment Savings Trust)
Fund choice
• Default funds (45)
• Ethical fund
• Sharia fund
• Higher risk fund
• Lower growth fund
• Pre-retirement fund
Choice of Investments for Pension Holder
Default fund
Target CPI
Target CPI+3%
Cash/bonds
Foundation phase
Growth phase
Consolidation phase
• As the employer’s only scheme
• For a particular group of workers alongside a scheme for a different category of workers
• As an entry level scheme during a waiting period
• As a base scheme, using another scheme for additional contributions
NEST uses
Nest vs. Private Provision
Nest Private Provision
Suitable for low value schemes?
Simple
Government publicity campaign
Low charges One scheme for all employees
Commission or consultancy charging
Tailored communication material
Adviser support
So what does it all mean for employers?
Employers Concerns
Source: making auto enrolment work, October 2010
HELP!
Why Salary Exchange – AKA “Sacrifice”
Example:• Lets assume two employees each paying a net pension contribution
of £80 per month out of their net pay
Employee 1 - Call Centre Worker on £15,000
Employee 2 – Call Centre Manager on £50,000• The above amounts are then grossed up by the insurer to £100 per
month• Alternatively the Call Centre Worker could exchange £1,411.76 from
his/her salary and Call Centre Manager £1,241.38• Members would have exactly same take home pay• But with Employee and Employer NI Savings then added to each
pension contribution...
Why Salary Exchange – AKA “Sacrifice”?
Call Centre Worker’s pension contribution will have risen to £133.88 gross per month (33% increase over net pay method)
Call Centre Manager’s pension contribution will have risen to £117.69 gross per month (17% increase over net pay method)
Summary
Auto-enrolment will start in 2012
Employer duties:
Administration
Contributions
Need for advice
costs
“Participant Question Time”
Use the ‘hands-up button to alert me to your question
Be sure to have a working microphone so that we can hear you
Don’t want to talk? then simply type a question into the chat box and I will ask this on your behalf
Today we have covered
There are a number of key questions all employers want to know
• When do we have to have a scheme in place?
• Who do we have to enrol into the scheme?
• How much it is going to cost?• What are my duties/responsibilities?• Is there anything I can do to reduce
the costs?
Argentis Financial Management can...
Provide tailored employee benefit advice to help an employer prepare for the forthcoming legislation
Simeon Adams
01932 591680
www.argentisfm.co.uk
Future PVHR webinars
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subjects
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