richard bartlett - ppma national public service debate at the cipd conf - 10 nov 2011
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Automatic enrolment and NEST
Richard Bartlett – Assistant Director of DistributionWendy Beaver – Head of Scheme Development
10 November 2011
© NEST Corporation 2011. We are entitled to bring any legal action necessary to protect our intellectual property rights. These slides do not constitute financial or other professional advice. You must not, or allow another party to, alter these slides in any way. Copying or distributing this material is allowed only with the permission of NEST Corporation.
2012 reforms: what’s changing?
Saving is a ‘minority sport’
Employers choose whether to contribute
Active choice often needed from worker
Behavioural barriers to take up
Uneconomic for existing providers to supply lower
earners
Saving is the norm
NEST is designed for our target market
Automatic enrolment
Do nothing = save in a pension
Employers have to offer a contribution to certain
jobholders
Now 2012 - 2016
© NEST Corporation 2011. We are entitled to bring any legal action necessary to protect our intellectual property rights. These slides do not constitute financial or other professional advice. You must not, or allow another party to, alter these slides in any way. Copying or distributing this material is allowed only with the permission of NEST Corporation.
Who does what?
• Scope of automatic enrolment
• Staging and phasing timetable
• Compliance with employer duties
• Regulator of workplace pension schemes, including NEST
• A new, trust-based pension scheme
• Public service obligation to accept all employers who want to use NEST to meet their employers duties
© NEST Corporation 2011. We are entitled to bring any legal action necessary to protect our intellectual property rights. These slides do not constitute financial or other professional advice. You must not, or allow another party to, alter these slides in any way. Copying or distributing this material is allowed only with the permission of NEST Corporation.
DWP’s staging and phasing plans
Oct 2012
Apr 2014
Aug 2014
Mar 2016
Oct 2016
Oct 2017
1 per cent worker contribution 3 per cent worker
Steady state
5 per cent worker
Large employers
Medium employers
Small/micro employersNew born
PAYEs
1 per cent employer contribution 2 per cent employer
Steady state
3 per cent employer
Staging
Phasing
© NEST Corporation 2011. We are entitled to bring any legal action necessary to protect our intellectual property rights. These slides do not constitute financial or other professional advice. You must not, or allow another party to, alter these slides in any way. Copying or distributing this material is allowed only with the permission of NEST Corporation.
The Employers’ Duties (Implementation) Regulations 2010
• 120,000 or more = 1st October 2012
• 50,000-119,999 = 1st November 2012
• 30,000-49,999 = 1st January 2013• 20,000-29,999 = 1st February
2013• 10,000-19,999 = 1st March 2013• 6,000-9,999 = 1st April 2013• 4,100-5,999 = 1st May 2013• 4,000-4,099 = 1st June 2013• 3,000-3,999 = 1st July 2013• 2,000-2,999 = 1st August 2013• 1,250-1,999 = 1st September 2013• 800-1,249 = 1st October 2013
• 500-799 = 1st November 2013• 350-499 = 1st January 2014• 250-349 = 1st February 2014• 240-249 = 1st March 2014• Less than 50... = 1st April 2014• 150-239 = 1st May 2014• 90-149 = 1st June 2014• 50-89 = 1st July 2014• Less than 50... = 1st August 2014
to 1st February 2016• New Employer = 1st March 2016
to 1st September 2016
© NEST Corporation 2011. We are entitled to bring any legal action necessary to protect our intellectual property rights. These slides do not constitute financial or other professional advice. You must not, or allow another party to, alter these slides in any way. Copying or distributing this material is allowed only with the permission of NEST Corporation.
What are waiting periods?
• Proposed in the Pensions Bill 2011, in line with the Making Automatic Enrolment Work Review
• Allows employers to defer enrolling jobholders for up to three months
• Can apply at staging date and on an ongoing basis as workers become eligible for automatic enrolment
• Individuals will need to be notified at their employer’s staging date (or their date of eligibility), of waiting period and have option to join earlier in the waiting period
• Also need to consider TPR Employer Registration timescales and record keeping
• Details set out in draft regulations.
© NEST Corporation 2011. We are entitled to bring any legal action necessary to protect our intellectual property rights. These slides do not constitute financial or other professional advice. You must not, or allow another party to, alter these slides in any way. Copying or distributing this material is allowed only with the permission of NEST Corporation.
Operating the earnings and contributions thresholds with NEST
£7,475
£5,035 or less
No automatic enrolment.No right to employercontribution
£5,035 £5,035
£7,475 or more
Automatically enrolled with employer contribution
£5,036 - £7,475
No automatic enrolment. But right to opt in with employer contribution
© NEST Corporation 2011. We are entitled to bring any legal action necessary to protect our intellectual property rights. These slides do not constitute financial or other professional advice. You must not, or allow another party to, alter these slides in any way. Copying or distributing this material is allowed only with the permission of NEST Corporation.
Certification
Percentage and type of pay Employer contribution
9 per cent of pensionable earnings* at least 4 per cent
8 per cent of pensionable earnings*, but the pensionable earnings of all relevant jobholders must constitute at least 85 per cent of the earnings of those jobholders
at least 3 per cent
7 per cent of total pay at least 3 per cent
The Government has recently been consulting on proposed certification options:
* pensionable earnings must be equal to or more than basic pay
© NEST Corporation 2011. We are entitled to bring any legal action necessary to protect our intellectual property rights. These slides do not constitute financial or other professional advice. You must not, or allow another party to, alter these slides in any way. Copying or distributing this material is allowed only with the permission of NEST Corporation.
Employer duties (at the core)
• Automatic enrolment into a workplace pension scheme
• Identification of eligible jobholders
• Achievement of scheme membership
• Decisions about and management of the waiting period
• Provision of enrolment information to the jobholder, including the right to opt out
• TPR started writing to the largest employers earlier this year.
© NEST Corporation 2011. We are entitled to bring any legal action necessary to protect our intellectual property rights. These slides do not constitute financial or other professional advice. You must not, or allow another party to, alter these slides in any way. Copying or distributing this material is allowed only with the permission of NEST Corporation.
Employer checklist
Initial activities. • Identify staging date(s)• Consider whether to change to fit into other employer
activities• Decide staging date• Arrange for a qualifying scheme to be set up if necessary• Notify payroll provider • Consider using waiting periods• Consider contribution basis, that is, qualifying earnings
bands or certification basis and contribution levels
© NEST Corporation 2011. We are entitled to bring any legal action necessary to protect our intellectual property rights. These slides do not constitute financial or other professional advice. You must not, or allow another party to, alter these slides in any way. Copying or distributing this material is allowed only with the permission of NEST Corporation.
Employer checklist
Initial activities • Identify and issue enrolment information to potential
members of the scheme• Identify and automatically enrol jobholders and process
workers opting in or issue waiting period notices to individuals
• Collect contributions via payroll • Operate opt-out processes where appropriate• Pay employer and worker contributions across before the
relevant due dates to the scheme• Register with TPR, providing details of qualifying schemes
© NEST Corporation 2011. We are entitled to bring any legal action necessary to protect our intellectual property rights. These slides do not constitute financial or other professional advice. You must not, or allow another party to, alter these slides in any way. Copying or distributing this material is allowed only with the permission of NEST Corporation.
Employer checklist
Subsequent ongoing activities • Repeat the enrolment and opt-out process for future
eligible jobholders and jobholders who opt in• Provide re-enrolment/registration information to TPR• Keep records of information issued and opt-out notices
received for a minimum period• Carry out annual certification/minimum contributions
process • Consider re-enrolment dates and re-enrol opt-outs as
required • Adjust minimum contribution to reflect future phasing-in
dates.
© NEST Corporation 2011. We are entitled to bring any legal action necessary to protect our intellectual property rights. These slides do not constitute financial or other professional advice. You must not, or allow another party to, alter these slides in any way. Copying or distributing this material is allowed only with the permission of NEST Corporation.
What can NEST offer?
© NEST Corporation 2011. We are entitled to bring any legal action necessary to protect our intellectual property rights. These slides do not constitute financial or other professional advice. You must not, or allow another party to, alter these slides in any way. Copying or distributing this material is allowed only with the permission of NEST Corporation.
The scheme proposition:complementing existing provision
Focused on its target market…
Designed to be easy to use
Clear communication
Tailored investment approach
Contribution limit
Restrictions on transfers
Help with retirement income
…with many attractive features…
Open to any employer
Travels with the member
Low charge
Online
A trust based scheme run in members’ interest
No burden for employers
…that will work in a variety of contexts
Sole scheme
For a particular group of workers
Entry-level scheme
Base scheme
© NEST Corporation 2011. We are entitled to bring any legal action necessary to protect our intellectual property rights. These slides do not constitute financial or other professional advice. You must not, or allow another party to, alter these slides in any way. Copying or distributing this material is allowed only with the permission of NEST Corporation.
Looking forward to 2012 - innovative solutions - opting out
Opting out•Heavily prescribed,
time-limited process
•Review has kept it unchanged
Employers•Need to engage with the process but not to run it
NEST will
•Run the opt-out process•Use online and other interactive media such as the telephone•Save employers costs•Take the compliance burden off employers
© NEST Corporation 2011. We are entitled to bring any legal action necessary to protect our intellectual property rights. These slides do not constitute financial or other professional advice. You must not, or allow another party to, alter these slides in any way. Copying or distributing this material is allowed only with the permission of NEST Corporation.
Opt-out refund (employer and scheme)
• Refund not always required - employer can hold onto contributions during the joining and opt out windows
• Where required, scheme refunds to employer, employer refunds worker contributions, net of tax
• Both refund processes must happen within a month* of the date of the opt-out notice
* but if the payroll has just closed this can be extended
© NEST Corporation 2011. We are entitled to bring any legal action necessary to protect our intellectual property rights. These slides do not constitute financial or other professional advice. You must not, or allow another party to, alter these slides in any way. Copying or distributing this material is allowed only with the permission of NEST Corporation.
Proposition to meet all our members’ needs
NEST Pre-
retirement Fund
NEST Pre-
retirement Fund
NEST Lower Growth FundNEST Lower Growth Fund
NEST ShariaFund
NEST ShariaFund
NEST Ethical Fund
NEST Ethical Fund
NEST Higher Risk Fund
© NEST Corporation 2011. We are entitled to bring any legal action necessary to protect our intellectual property rights. These slides do not constitute financial or other professional advice. You must not, or allow another party to, alter these slides in any way. Copying or distributing this material is allowed only with the permission of NEST Corporation.
NEST Retirement Date Funds
• Age-based investment funds to meet members’ needs
Your 2058 Retirement Fund
Your 2039 Retirement Fund
Your 2022 Retirement Fund
© NEST Corporation 2011. We are entitled to bring any legal action necessary to protect our intellectual property rights. These slides do not constitute financial or other professional advice. You must not, or allow another party to, alter these slides in any way. Copying or distributing this material is allowed only with the permission of NEST Corporation.
For members who seek higher returns and are prepared to take more risk
Invested in return seeking assets – for example, global equities and diversified beta
For members who want to take as little investment risk as possible
Invested 100 per cent in a liquidity fund
For members who join NEST late in their careers but still manage to build a large enough pot to buy a retirement income
Invested 75 per cent annuity matching and 25 per cent liquidity funds
For members who want to invest in a portfolio that meets ethical criteria
Invested in ethical equities, along with gilts
For members who want to invest in compliance with Sharia principles
Invested 100 per cent in Sharia Global Equity Fund
Additional fund choices to meet diverse needs
NEST Pre-
retirement Fund
NEST Lower Growth Fund
NEST ShariaFund
NEST Ethical Fund
NEST Higher Risk Fund
© NEST Corporation 2011. We are entitled to bring any legal action necessary to protect our intellectual property rights. These slides do not constitute financial or other professional advice. You must not, or allow another party to, alter these slides in any way. Copying or distributing this material is allowed only with the permission of NEST Corporation.
Charges - how will NEST compare?
5.8%
94.2%
Reduction in pot due to charges at NEST level
reduction due to charges
remaining fund
© NEST Corporation 2011. We are entitled to bring any legal action necessary to protect our intellectual property rights. These slides do not constitute financial or other professional advice. You must not, or allow another party to, alter these slides in any way. Copying or distributing this material is allowed only with the permission of NEST Corporation.
Getting your money out of NEST
NEST scheme and online information
Retirement income
(Choose from NEST
Retirement Panel)
Shopping around for
a retirement
income
Using the Retirement Tool
Taking your pot as cash
Transfer out at
retirement
© NEST Corporation 2011. We are entitled to bring any legal action necessary to protect our intellectual property rights. These slides do not constitute financial or other professional advice. You must not, or allow another party to, alter these slides in any way. Copying or distributing this material is allowed only with the permission of NEST Corporation.
NEST help for employers
• Easy to use, 24/7 website• Scheme governance • Delegate options• Enrolment information
templates• Automatic ‘phasing’ of
contributions• Manage opt outs, including by
telephone• Online file templates• No admin for ex employees• Services for members,
including help at retirement
© NEST Corporation 2011. We are entitled to bring any legal action necessary to protect our intellectual property rights. These slides do not constitute financial or other professional advice. You must not, or allow another party to, alter these slides in any way. Copying or distributing this material is allowed only with the permission of NEST Corporation.
Employers can send enrolment and payments data via file uploads
© NEST Corporation 2011. We are entitled to bring any legal action necessary to protect our intellectual property rights. These slides do not constitute financial or other professional advice. You must not, or allow another party to, alter these slides in any way. Copying or distributing this material is allowed only with the permission of NEST Corporation.
NEST will automatically increase minimum contributions in line with ‘phasing’
© NEST Corporation 2011. We are entitled to bring any legal action necessary to protect our intellectual property rights. These slides do not constitute financial or other professional advice. You must not, or allow another party to, alter these slides in any way. Copying or distributing this material is allowed only with the permission of NEST Corporation.
Different people (or your advisers) can manage different parts of the process
© NEST Corporation 2011. We are entitled to bring any legal action necessary to protect our intellectual property rights. These slides do not constitute financial or other professional advice. You must not, or allow another party to, alter these slides in any way. Copying or distributing this material is allowed only with the permission of NEST Corporation.
NEST Corporation
Chair - Lawrence Churchill
Trustee Members
Tom Boardman
Sue Slipman
Paul Hewitt
Chris Hitchen
Julius Pursaill
Laurie Edmans
Nigel Stanley
Iraj Amiri
Sharon Darcy
© NEST Corporation 2011. We are entitled to bring any legal action necessary to protect our intellectual property rights. These slides do not constitute financial or other professional advice. You must not, or allow another party to, alter these slides in any way. Copying or distributing this material is allowed only with the permission of NEST Corporation.
Contact us
www.nestcorporation.org.uk