Date post: | 30-Dec-2015 |
Category: |
Documents |
Upload: | chandler-nelson |
View: | 28 times |
Download: | 0 times |
AUTOMATIC ENROLMENT
WHAT ARE THE RULES?
WHAT DOES IT MEAN FOR EMPLOYERS?
ROBERT COCHRAN
13TH MAY 2014
The slides are authorised for use by accredited Scottish Widows staff in corporate pensions presentations to employers, trustees and UK financial advisers and should not be distributed to or relied upon by any other person.
AGENDA
• HOW BIG A CHANGE IS AUTOMATIC ENROLMENT?
• WHAT ARE THE RULES?
• IMPACT ON EMPLOYERS
• Q&A
2
RULES
HOW BIG A CHANGE
3
A tidal wave of schemes and
new members is set to hit the UK
pensions providers.
Corporate Adviser, September 2013
CAPACITY PRESSURE FOR ALL
4
• 1.35 million employers
• 21,000 advisers
• How many schemes per adviser?
• 64
• How many schemes have been written in the last 20 years?
• 200,000
HOW BIG A CHANGE
5
0%Employers
High Provision without a Waiting Period
Employment
High Provision with a Waiting Period
Borderline Provision Poor Provision No/Shell Provision
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
This chart illustrates the proportion of employers and employees falling into each of these five categories.
Source: Employer Pension Provision Survey 2009, Department for Work and Pensions.
WHO’S ELIGIBLE FOR AUTOMATIC ENROLMENT?
6
QUALIFYING EARNINGS
AGE <£5,772 £5,772-£10,000 >£10,000
16-21 Entitled worker Non-eligible jobholder Non-eligible jobholder
22-SPA Entitled worker Non-eligible jobholder Eligible jobholder
SPA -75 Entitled worker Non-eligible jobholder Non-eligible jobholder
ASSESSING AND CATEGORISING THE WORKFORCE
2014/2015 LEVELS
Eligible jobholder
IT’S ALL ABOUT THE QUALITY OF THE DATA
7
EMAIL EXTRACT (RECIEVED AUGUST 2013) – STRUGGLING WITH DATA ISSUES
• I’ve opted for Plan B. We’re asking all employees to come to the NEC in Birmingham tomorrow.
• We’ll then do a hands up as to whose in a pension plan, they can then go. Who’s 21 or under, or over state
pension age, they’re on the bus out immediately.
• Next out are those earning less than £787.
• With the remainder, we’ll ask them who they are, where they live, what their NINO is, email address, and so on.
They’ll then be auto enrolled and will be free to leave.
• This will be called the Thomson Pettigrew auto enrolment method, similar in its eventual complexity to the
Duckworth Lewis method for determining who’s won in a game of cricket shortened by rain.
• Seriously though, I’m sat with an envelope and pen, and would appreciate a little help. Can you call me when
you’re free, please?
SIMPLIFIED CERTIFICATIONS OPTIONS
9
EMPLOYER MINIMUM MINIMUM TOTAL
Full basic salary (pensionable pay) 4% 9%
Full basic salary, and at least 85% of total pay is pensionable
3% 8%
Total earnings (P60) 3% 7%
QUALIFYING EARNINGS DEFINITION (2014/15) – P60 INCOME FROM £5,772 TO £41,685
OPTING OUT
10
Every 3 years
OPTING OUTEngage your
workforce
REVIEWEngage your
workforce
1 monthwindow
Opt outnotice
Fill innotice
Refundworker
Inform
provider
Refund
employer
1 monthwindow
Opt outnotice Fill in
notice
Refundworker
Inform
provider
Refund
employer
Default ‘re-enrolment date’ is 3rd anniversary of employer staging date.
ADDITIONAL REQUIREMENTS
11
ALL EMPLOYERS WILL HAVE ADDITIONAL REGULATORY REQUIREMENTS
• Employers prohibited from incentivising opt outs.
• Register with TPR to show they are meeting their duties.
• Payments will be monitored by administrators orscheme trustees who need to report failures.
• Must keep records for six years.
• Must retain opt in and opt out notices for four years
CHECKLIST
EMPLOYERS – WHO DEALS WITH AUTOMATIC ENROLMENT ISSUES?
12
LARGE
MEDIUM
SMALL
PENSIONS DEPARTMENT/HUMAN RESOURCES
PAYROLL
OWNER
EMPLOYERS NEED TO BE THINKING ACROSS THREE AREAS
13
HR, Payroll & Finance
Change to Systems/Processes
Hard cost of contributions
Compliance and registering
Administration• Set up & Day 1 costs• Ongoing costs
• Eligible employee• Non eligible employees
• Avoiding risk and failure • Governance Framework
I’M AN EMPLOYER – WHAT DO I NEED TO KNOW?
14
• When do I have to have my scheme in place?
• Who do I have to enrol into the scheme?
• How much is it going to cost?
• What are my options in terms of providing an eligible scheme?
• Is there anything I can do to fund more efficiently?
• What systems do I need for the administration?
?
WHEN DO I HAVE TO HAVE MY SCHEME IN PLACE?
15
EMPLOYER SIZE AUTOMATIC ENROLMENT STAGING DATE
120,000 1 October 2012
50,000-119,999 1 November 2012
30,000-49,999 1 January 2013
20,000-29,999 1 February 2013
10,000-19,999 1 March 2013
6,000-9,999 1 April 2013
4,100-5,999 1 May 2013
4,000-4,099 1 June 2013
3,000-3,999 1 July 2013
2,000-2,999 1 August 2013
1,250-1,999 1 September 2013
800-1,249 1 October 2013
500-799 1 November 2013
350-499 1 January 2014
250-349 1 February 2014
50-249 1 April 2014 to 1 April 2015
Test tranche <30 employees 1 April 2015 to 30 June 2015*
30-49 employees 1 August 2015 to October 2015
Less than 30 employees 1 January 2016 to 1 April 2017
New employers 1 May 2017 to February 2018
The rules for staging within each size grouping have still to be confirmed
EMPLOYER STAGING DATES
* Please note that there are nine staging dates within this period, depending on the employer’s size. For further information, please visit The Pension Regulator website.
EMPLOYER REPORT
17
• Staging date calculation.
• Employer timeline.
• Check certification of existing scheme.
• Workforce assessment.
• Employer cashflow modeling.
WHAT ARE MY OPTIONS FOR PROVIDING AN ELIGIBLE SCHEME?
18
• Defined Benefit occupational trust based.
• Defined Contribution occupational trust based.
• Group Personal Pension.
• Group Stakeholder.
• Multi Employer Trust.
• People’s Pension.
• Now: Pensions.
• Nest.
Samecontributiontest.
IS THERE ANYTHING I CAN DO TO FUND THIS MORE EFFICIENTLY?
19
Source: Corporate Adviser, September 2010.
WHY SALARY EXCHANGE?
20
POTENTIAL INCREASED
CONTRIBUTION OVER NORMAL
NET PAY METHOD
POTENTIAL INCREASED
CONTRIBUTION OVER NORMAL
NET PAY METHOD
EARNINGS £30,000 EARNINGS £50,000
33.9% 17.7%
*Assumes net take home pay remains the same, employer 100% NI reinvested.
ONLINE AUTOMATIC ENROLMENT SOLUTION – AN INTEGRATED APPROACH
22
Employerpayroll file
*Best Group Pension Provider Award, Corporate Adviser 2013.
PAYROLL PROVIDERS OR THIRD PARTY SOLUTIONS - WHAT CAN THEY DO?
23
EverythingEverything
PartialPartial
Assessment & ContributionsCommunications
Opt-outs
Assessment Contribution Calculations
Collect Contributions
No AssistMeBack office linkNo AssistMe
Back office link
NothingNothing
1 Pass AssistMe1 Pass AssistMe
2 Pass AssistMe2 Pass AssistMe
ADEQUACY
24
MEDIAN INCOME EARNER…..SAVING FOR 40 YEARS.
30% 45%
60-66%1
Automatic Enrolment Additional Savings
state pension state pension & auto enrolment
target income replacement rate
Source: Making Automatic Enrolment work – Oct 2010
1A New Pension Settlement for the 21st century, second report, Pensions Commission, Nov 2005, Govt target by 2053
IMPACT
25
PENSIONS REPLACEMENT AMOUNT THROUGH AUTO ENROLMENT – 30 YEAR OLD SAVER
ALL 68%
ALL 44%
ALL 28%
£15,000 Salary
£30,000 Salary
£90,000 Salary
Source: Scottish Widows Replacement Calculator
RETIREMENT EXPECTATIONS
26
Source: Scottish Widows UK Pensions Report, June 2013Ninth Annual Pensions Report, Retirement savings across the nation.
WHAT CAN YOU EXPECT FROM YOUR PENSION PROVIDER?
27
What providers can do to help you make automatic enrolment a success.
• Benefit of experience.
• Technology to meet your needs.
• Robust communications.
• Education and employee engagement.
DISCLAIMER
28
This presentation represents Scottish Widows’ interpretation of current and proposed legislation and HM
Revenue & Customs practice as at the date of publication – these may change in future.
This material is for use by UK Financial Advisers only. It is not intended for onward transmission to private
customers and should not be relied upon by any other person.
Scottish Widows plc. Registered in Scotland No. 199549. Registered Office in the United Kingdom at 69 Morrison Street, Edinburgh EH3 8YF. Telephone: 0131 655 6000.Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Financial Services Register number 191517.
24417 07/13