shine webinar auto enrolment
TRANSCRIPT
Automatic enrolment
Francois Barker & Teresa Dolan Eversheds LLP
The legal framework
Issues covered
• What & When: summary of key duties and staging dates
• Who: which staff are covered and possible penalties
• How: using existing schemes and managing costs
__________
Questions
Question for you ....
• When is your organisation’s staging date?
a) already passed?
b) Jan – June 2013?
c) July – Dec 2013?
d) 2014?
e) don’t know
Session 1
Key duties
Key employer duties
1. From staging date, enrol “eligible jobholders” automatically into an automatic enrolment scheme
2. Pay minimum DC contributions or provide minimum DB benefits
3. Re-enrol eligible jobholders who opt-out approx every 3yrs
Other employer duties
• Provide eligible jobholders, non-eligible jobholders and entitled workers with prescribed information
• Register with Pensions Regulator within 4 months of “staging date”
• Keep records of auto-enrolments, opt-ins, opt-outs and contributions
• legally, for at least 6 years (4 years for opt-outs)
• practically, for much longer
• Not to induce opt-outs
Worker categories and rights
Earnings Age 16-21 Age 22-SPA SPA- age 75
£8,105+ in
2012/13 (£9,440+ in 2013/14)
Non-eligible jobholder –
may opt-in to an automatic enrolment scheme
Eligible jobholder –
must be auto-enrolled into an
automatic enrolment scheme
Non-eligible jobholder –
may opt-in to an automatic enrolment scheme
£5,564 - £8,105 (or £9,440)
Non-eligible jobholder – may opt-in to an automatic
enrolment scheme
Less than £5,564
Entitled worker – can request to join a pension
scheme (but it does not have to be a qualifying scheme and not entitled to employer contributions)
Opting-out
• Eligible jobholders and non-eligible jobholders who opt-in can opt-out within 1 month and receive a refund of their contributions, but:
– not before they have been auto-enrolled
– opt-out paperwork must normally come from scheme
– employer must not incentivise opt-outs
– employers must re-enrol roughly every 3 years
• Can leave scheme after statutory opt-out window
• Beware workers with enhanced/fixed protection!
When?
• Phased introduction from 1 Oct 2012 – see www.tpr.gov.uk/staging
• ‘Staging date’ determined by number of people in employer’s PAYE payroll scheme on 1 April 2012
• What about:
– employers with more than one payroll scheme?
– multi-employer payroll schemes?
– small employers in large payroll scheme?
When?
Size of payroll scheme on 1 April 2012
Staging date
120,000 – 10,000 1 Oct 2012 – 1 Mar 2013
9,999 – 250 1 Apr 2013 – 1 Feb 2014
249 – 50 1 Apr 2014 – 1 Apr 2015
Less than 49 1 June 2015 – 1 Apr 2017
New employers 1 May 2017 onwards
Question for you ....
• How do you intend to deal with eligible jobholders who have fixed or enhanced protection?
a) enrol them
b) enrol them plus side conversation
c) not enrol them
Session 2
Which staff are included and possible penalties
Who is a “worker”?
In scope
Employees
Those performing work personally and not as part of own business
Out of scope
x Self-employed
x One person companies
x Office holders
x Volunteers
agency staff ? casual/zero hours staff?
What about?
International workers
• AE only applies to workers who are “working or ordinarily working in the UK”
• Question of fact – useful guidance on secondments
Safeguards for workers
Eligible jobholders
Non-eligible jobholders
Entitled workers
Prohibited recruitment conduct
X X X
Not to be unfairly dismissed or suffer detriment on grounds related to new employer duties
X X X
Inducements X X
X
Note – safeguards in force since 1 July 2012
Enforcement by the Pensions Regulator
Stage 1
• Compliance notice
• Unpaid contributions notice
Stage 2
• Fixed penalty notice
• £400
Stage 3
• Escalating penalty notice
• £50 - £10,000 per day
TUPE and auto-enrolment
• TUPE Pensions Protection Regulations –v- auto-enrolment
• Duty to automatically enrol transferring employees?
• Use of past opt-outs not allowed
Question for you ....
• Which department within your organisation do you think is the most appropriate to lead the AE initiative and monitor compliance?
a) Pensions
b) HR
c) Payroll
d) IT
e) Legal
Session 3
Using existing schemes and managing costs
Using an existing scheme
• An automatic enrolment scheme:
(i) must be a qualifying pension scheme, and
(ii) must not contain any provisions which:
– prevent the employer fulfilling its auto-enrolment and re-enrolment duties, and
– require a member to make a choice or provide information
• Review eligibility/admission requirements
• Default fund required
What is a qualifying pension scheme?
• To be a qualifying pension scheme, a scheme must:
– be an HMRC registered occupational or personal pension scheme operating automatic enrolment; and
– meet minimum "quality standards"
Minimum DC contributions
• Minimum employer DC contributions to be phased-in over 5 years
Date Minimum employer contribution
(% of qualifying earnings)
Minimum total contribution
(% of qualifying earnings)
Staging date – Sept 2017
1% 2%
Oct 2017 - Sept 2018
2% 5%
From Oct 2018 3% 8%
Qualifying pension scheme - DC • Total contributions of 8% of “qualifying earnings” (min 3%
employer)
OR
• Total contributions of 9% of “pensionable earnings” (min 4% employer) – where pensionable earnings are equal to or greater than basic pay
OR
• Total contributions of 8% of “pensionable earnings” (min 3% employer) - where at least 85% of total earnings of all eligible jobholders is pensionable
OR
• Total contributions of 7% of “earnings” (min 3% employer) – i.e. contributions are payable on all earnings
Qualifying pension scheme - DB
• Contracted-out
OR
• Contracted-in with:
– pension for life at state pension age
– annual accrual rate of 1/120th of average “qualifying earnings” in last three tax years preceding the end of pensionable service up to maximum of 40 years, and
– statutory revaluation and pension increases
• Additional requirements apply to hybrid schemes
and average salary schemes
Question for you ....
• Which pension arrangement is your organisation going to use for auto enrolment?
a) trust based DC scheme
b) contract based DC scheme
c) DB scheme
d) external Master Trust
e) unsure
Saving costs - ‘postponement’
• Employers can operate a waiting period of up to 3 months by giving notice to workers
• May help with:
– casual/seasonal workers
– temporary workers
– quick leavers
– alignment of auto-enrolment with payroll
• Jobholders’ right to opt-in
Transitional period for DB schemes
• Employers with open DB/hybrid schemes can delay auto-enrolment until 1 October 2017
• Only applies to certain eligible workers
• Must give notice and auto-enrol into appropriate scheme at end of transitional period
• Worker can still opt-in to a qualifying scheme
Saving costs - salary sacrifice
• Employers can continue to use salary sacrifice but need to consider:
– right to opt-out and HMRC guidance
– how to implement
– timing of implementation
• Salary sacrifice arrangement could bring earnings under trigger
Question for you ....
• Of those who don’t already use salary sacrifice to save NI on pension contributions, who would now consider using this mechanism?
YES or NO
Conclusion – key action points
1 Identify your staging date and work back
2 Find an owner and form a working group
3 Identify all “workers”
4 Check terms of self employment / agency / secondment
5 Decide if you want to adapt an existing scheme - or use a new one - or both
6 Consider using postponement mechanisms
7 Consider using salary sacrifice to save costs
8 Consider changes to wider benefits package
9 Take account of fixed / enhanced protection
10 Allow enough time
Any questions?
Contact details
Francois Barker
Pensions Partner
0845 497 1559
07825 341131
Teresa Dolan
Employment Partner
0845 497 1540
07775 010897