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Auto Enrolment
Auto Enrolment
A thank you to Rudyard Kipling…
“The elephant’s child” from the Just So Stories
“I Keep six honest serving-men: (They taught me all I knew) Their names are What and Where and When
And How and Why and Who.”
To paraphrase a little…
What?
Auto Enrolment – What it is
At its simplest:
The compulsory inclusion of all employees in a workplace pension scheme with employer contributions supplementing employee contributions.
Why?
Auto Enrolment – Why is it needed?
Historical context
The UK faces a major long term challenge• People are living longer• Some workers not saving for retirement
Stakeholder Pensions introduction in April 2001, membership was voluntary and take-up lowStill an estimated 7m people not making any retirement provision
Pension Commission Report 2005– Personal accounts – Auto Enrolment
• Introduced through– Pension Act 2008– Pension Bill 2011– Finance Act 2011
Auto Enrolment
Finance Act 2008• Introduced automatic enrolment into work based pension saving
• Concept of ‘worker’ and ‘jobholder’
• Need not be company or other available scheme, must meet certain minimum requirements
When?
Auto Enrolment – When is all of this taking place?
Now!The timetableStaging dates based on PAYE size
Starts 1 October 2012 (PAYE payroll 120,000+)
Auto Enrolment
Timetable contd
Employers with more than one PAYE ref number – largest PAYE scheme (number of persons) determines staging date that applies
Employers who share a single PAYE scheme with other employers will all have same staging date, determined by that PAYE scheme
Auto Enrolment
Timetable contdRules kick in from employer’s staging date
Employer can delay auto-enrolment for existing qualifying employees beyond staging date (4 years and 4 months) in respect of current, but not new, employees
Can opt to bring forward staging date
Who?
Auto Enrolment
Some terms defined
Worker = contract of employment / contract to perform services personally (excludes office holders e.g. councillors?)
Jobholder = worker, 16 or over but under 75 with qualifying earnings
Qualifying earnings (gross) = >£5,035*
* Planned to rise to £5,564 (to align with national Insurance contributions lower earnings limit) and an upper limit of £39,853.
Auto Enrolment
3 types of employee – different treatment
“Eligible” jobholders - auto-enrolled into “qualifying scheme”
“Non-eligible” jobholders – can opt to join “qualifying scheme”
“Entitled” workers – can opt to join a scheme
Auto Enrolment
Eligible jobholders
New employees 22+ and <SPA with gross qualifying earnings with employer >£7,475*
New employees who opt out <22 or < £7,475* who attain 22 / earnings increase to >£7,475*
Have to be auto-enrolled into a “qualifying scheme”
Aggregate earnings issues * Pensions Act 2011 – planned to rise to £8,105
Auto Enrolment
Non-eligible jobholders
New employees 16+ but <75, with qualifying earnings >£5,035* but <£7,475**
New employees 16+ but <22, or SPA+ and <75, with qualifying earnings >£7,475**
Can elect, in writing to employer, to join “qualifying scheme”
* Planned to rise to £5,564 ** Pensions Act 2011 – planned to rise to £8,105
Auto Enrolment
Entitled workers
New employees 16+ and <75 earning £5,035* or less
Can elect, in writing to employer, to join a scheme
* Planned to rise to £5,564
Auto Enrolment
How this works for the LGPS
Currently, all employees 16+ and <75 eligible to join LGPS (except < 3 month contracts)
Potential amendments to the LGPS so that:all eligible employees automatically join LGPS those with <3 month contracts can opt in
How?
Auto Enrolment
Information requirements – eligible jobholder
Within 1 month of auto-enrolment date tell eligible jobholder:
- they’ve been enrolled + enrolment date- contact details for scheme and where they can get further info- contributions that will be deducted from pay and confirm tax relief given- information on right to opt out / back in
Auto Enrolment
Information requirements eligible jobholder contdWithin 1 month of enrolment date tell MPU:
- name, gender, DOB, NI number- home address (and work address)- e-mail (work if provided, home if known) - auto enrolment date- gross earnings in pay ref period - contributions
Auto Enrolment
Information requirements non-eligible job holderWithin 1 month of meeting conditions for being a “non-eligible” jobholder, employer must tell jobholder:
- can elect to join the “qualifying scheme”- written election to employer must be signed - electronic election must include statement “submitted personally” - details of where to obtain further info
Note: if opts to join, enrolment date is first available pay ref period and info requirements would be the same as for eligible job holder
Auto Enrolment
Information requirements non-eligible jobholder contd
But: as they will will auto-join LGPS (not opt in), info requirements
replaced by:
Within 2 months of joining LGPS, tell the member- they are an active member of a “qualifying scheme” (and you must offer a “qualifying scheme” if you cease to offer LGPS)- where to obtain further info
Auto Enrolment
Information requirements entitled workerWithin 1 month of meeting of meeting conditions for being an “entitled” worker, employer must tell worker:
- can elect to join a scheme- written election must be signed - electronic election must include statement “submitted personally” - details of where to obtain further info Note: if opts to join, enrolment date is in accordance with Scheme rules and info requirements are the same as for eligible jobholder
But will auto-join LGPS so info requirements somewhat superfluous (unless < 3 months contract)
Auto Enrolment
Opting outCan eligible and non-eligible jobholders opt out?
Yes - after enrolled (but non-eligibles can rescind opt in before enrolment date)
Prescribed form (from administering authority)
Can opt out up to one month* after later of enrolment date or date you gave enrolment information
* 6 weeks if first form filled in incorrectly Note: can still opt out of LGPS after one month / 6 weeks but this is then under the LGPS opt out rules
Auto Enrolment
Record keeping for opt outs
You must keep copy of opt out form for 4 years
We must keep name of optant out, date notified option out, date of cessation of membership
Going forwardAhead of first staging date (October) we will review current forms
Auto Enrolment
Re-enrolment for eligible jobholders
Within 3 months before / after 3rd anniversary of staging date (provided continuous employment and not opted out within previous 12 months)
Thereafter, within 3 months before / after 3rd anniversary of previous chosen re-enrolment date Information requirements same as for auto-enrolment, Opt out procedures same as for auto-enrolment
Auto Enrolment
Current LGPS members at staging dateJobholders:Remain in LGPS
Within 2 months of staging date, notify employee: - remains active member of a “qualifying scheme” (and you must offer a “qualifying scheme” if ceases to offer LGPS)- where to obtain further info
Entitled workersRemain in LGPS
No info requirements
Auto Enrolment
Current eligible jobholders who have already opted out of LGPS
Auto-enrol from the staging date (even if opted out within 12 months prior to staging date)
But you can opt for transitional delay (4 years and 4 months)need to tell those eligible jobholders that this has happened
and that they can elect to join
Auto Enrolment
Non-eligible jobholders and entitled workers who have already opted out of LGPS
give information about right to opt in from staging date (or date they become non-eligible jobholder*) even if opted out within 12 months prior to staging date
* e.g. employee earnings increase to >£5,035 (planned to rise to £5,564)
Auto Enrolment
A few issues
You are responsible for enrolment / re-enrolment processno current off the shelf solutions
Should you opt for earlier staging date?
Should you use the transitional period?
If you don’t offer LGPS to all employees
Who? (again)
Auto Enrolment – Who? (again)
Responsibilities
EmployerAdministering AuthorityOverall – The Pensions Regulator
Auto Enrolment
PracticalitiesContributions
Conts to be paid over electronically by 22nd of following month (or by 19th in any other case)
ComplianceIf conts not paid within 3 months of due date, you can be made to pay all contributionsRegulator has powers to impose penalties for non-compliance with contravention notices
RegistrationProvide Pensions Regulator with info, within 4 months of staging date saying how you have complied with your duties
Record keepingkeep records to enable Regulator to check complianceRecords normally to be kept for 6 years
Responsibilities
Employers MUST Employers MUST NOT
Auto enrol and re-enrol/deduct payments
Register/re-register their scheme
Certify/re-certify
Provide information to eligible and non-eligible jobholders Process opt outs/make refunds
Keep records
Offer advice
Discourage membership
Give jobholders the opt-out form
Encourage opt-outs
Use ‘Prohibited recruitment conduct’
In summaryCategories of Worker What the employer has to do
Eligible Jobholder
• Employer must automatically enrol and make contributions• If using postponement, the employer must provide notification to the eligible jobholder• Employee must process any opt out notice• Employer must automatically re-enrol approximately every 3 years• Employer must keep records of the automatic enrolment process
Non-eligible Jobholder
• Has the right to opt in and the employer must arrange pension scheme membership if employee opts in• Employer must provide information about the right to opt in, unless using postponement• If using postponement, the employer must provide notification to the non-eligible jobholder• Employer must process any opt out notice• Employer must keep records of the enrolment process
Entitled Worker
• Has the right to join and the employer must arrange pension scheme membership in employee decides to join• Employer must provide information about the right to join, unless using postponement• If using postponement, the employer must provide notification to the entitled worker• Employer must keep records of the joining process
“A person guilty of an offence under this section is liable -
a)on conviction on indictment, to imprisonment for a term not exceeding two years, or to a fine, or both;
b)on summary conviction to a fine not exceeding the statutory maximum.”
The Pensions Act 2008, Section 45(2)
It’s not just hefty fines from the Regulator!
Where?
Auto Enrolment – Where can further information be found?
Employer internet site
Micro-site with links to:these slides;external resources, e.g. The Pensions Regulator
And - coming soon: The Local Government Group (formerly the Local Government Employers organisation) Guide to Auto Enrolment
