Pension Auto-Enrolment
Cameron Freer DipPFS
Senior Consultant
Auto-Enrolment – In a nutshell...
From 2012, the process of automatically enrolling employees into a qualifying
workplace pension or similar scheme, such as National Employment Savings
Trust (NEST), will begin
Employers must make contributions for any employees auto-enrolled into a
workplace pension scheme
What will employers have to do?
Employers will be required by law to:
Set up & register a suitable pension scheme
Provide Pension/Auto-Enrolment information to employees
Enrol all eligible employees into a qualifying scheme
Confirm all relevant steps taken to The Pensions Regulator (TPR)
Pay contributions for all eligible employees, unless they choose to opt-out of the
scheme
When will this affect employers?
Every employer has been allocated a ‘Staging Date’, the date from which that
employer must comply with the new legislation.
1st October 2013 - Employers with 800 - 1,249 employees
1st November 2013 - Employers with 500 - 799 employees
1st January 2014 - Employers with 350 - 499 employees
1st February 2014 - Employers with 250 - 349 employees
1st April 2014 - Employers with 160 - 249 employees
1st May 2014 - Employers with 90 - 159 employees
1st July 2014 - Employers with 62 - 89 employees
From 1st August 2014 - Employers with 61 or less employees
The full list of staging dates can be found on The Pension Regulator’s website:
http://www.thepensionsregulator.gov.uk/employers/staging-date-timeline.aspx
How much will this cost? The amount of contributions that must be paid into a qualifying scheme is being
phased in as follows:
October 2012 to
September 2017
October 2017 to
September 2018
October 2018
onwards
Total Minimum Contribution 2% 5% 8%
Employer Minimum
Contribution
1% 2% 3%
Employee Minimum
Contribution
1% 3% 5%
The minimum contributions are a % of band earnings between £5,564 and
£42,475 (known as, ‘Qualifying Earnings’) for 2012-13.
Auto-Enrolment: The first steps
Assess your workforce
(HR/Legal)
Determine what qualifying pension scheme(s) will be used
(HR/Payroll)
Determine what contribution basis will be used
(Finance)
Establish the auto-enrolment process
(HR/Legal/Payroll/Finance)
Employer with
NO scheme
Employer with
an EXISTING scheme
Find out Staging Date Find out Staging Date
Assess Workforce Assess Workforce
Determine Earnings Definitions Review Earnings Definitions
Calculate Costs Calculate Costs
Consider Scheme Type Review Existing Scheme Type
Communicate to Workers Communicate changes/terms to
workers
Plan implementation Plan implementation
Enrol eligible job holders Enrol eligible job holders
Register with TPR & keep records Register with TPR & keep records
Contribute to workers pensions Contribute to workers pensions
Those first steps in detail...
Assess the workforce
Who can Join and who must receive an Employer Contribution?
Auto-Enrol Can Opt In or
Join
Employer
Contribution
Eligible Jobholders
Non-eligible Jobholders
Entitled Workers
2012/13 Qualifying Earnings
Age < £5,564 £5,564 - £8,105 > £8,105
16-21 Entitled Worker Non-eligible Jobholder Non-eligible Jobholder
22-SPA Entitled Worker Non-eligible Jobholder Eligible Jobholder
SP-75 Entitled Worker Non-eligible Jobholder Non-eligible Jobholder
What about changing earnings?
Continual assessment
Ea
rnin
gs
Monthly AE trigger £675.42
Self-Certification options
For 2012/13 Employer
Minimum Minimum Total
Pensionable Pay
(must be at least equal to Basic Pay) 4% 9%
Qualifying Earnings
(£5,564 - £42,475) 3% 8%
Pensionable Pay
(provided that constitutes at least 85% of earnings) 3% 8%
All Earnings
(P60) 3% 7%
Automatic Enrolment Date
Elig
ible
Sta
gin
g D
ate
/ S
tart
ing
Da
te
Employer must automatically
enrol/assess workers within 3
months
Auto-Enrolment
Max 3 month window
1 month
communication
window
1st pay day - deduct contributions
1 month opt out
window
Refu
nd
Op
t o
ut
Salary exchange / Salary sacrifice “Some employers make pension contribution payments by a salary sacrifice
arrangement....An employer operating a pension scheme and enrolling workers
using salary sacrifice is doing so outside the automatic enrolment provisions. ”
Workplace Pension Reform – Detailed Guidance No.4
February 2012 v3.0
“Special legislation has been enacted...for the following exempt benefits:
...Employer made contributions under a registered pension scheme
It is not necessary to stipulate a period for which the arrangement must be
entered into or to set out 'lifestyle changes'.”
HMRC
What must employers not do?
Offer advice
Discourage membership
Encourage jobholders to opt out
Distribute the Opt Out form
Use ‘prohibited recruitment conduct’
Create barriers to the auto-enrolment process
Doing nothing is not an option!
“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)
Source: Pensions Act 2008, Office Of Public Sector Information – www.opsi.gov.uk.
Why act now?
Ensure existing budgets are fit for purpose
Employee engagement
Consider Salary Exchange
Retail Distribution Review
Be one step ahead...
The Pensions Regulator www.thepensionsregulator.gov.uk
Important Information
The information contained within this presentation is based on our
understanding of present law and HM Revenue and Customs practice, which
may be subject to change.
The presentation is for illustrative purposes only and should not be construed as
advice. No actions should be taken based on the information in this presentation
alone.
Kingston Smith Financial Advisers are appointed representatives of Argentis
Financial Management, who is authorised and regulated by the Financial
Services Authority.
The Financial Services Authority does not regulate tax and trust advice.
The value of an investment can fall as well as rise. If investments are encashed
in the early years the investor may get back less than the amount originally
invested.
Past performance is no guarantee of future returns.
Employment Tribunal Reforms
Joanna Cowie
Head of Legal
Resolving disputes before claims:
Mandatory early conciliation by ACAS
Standard wording for compromise agreements
“Protected Conversations”
Reforming the Tribunal System:
Judges to hear unfair dismissal cases “sitting alone”
Fees for Employees to bring tribunal claims
“Fines” for employers losing at tribunal
From April 2012:
Qualifying period for unfair dismissal – 2 years
service
Only for new starters from 6 April 2012
Written reason for dismissal – 2 years service
Employment Tribunal Fees:
Effective from Summer 2013:
Level 1 (unpaid wages & redundancy pay)
£160 to lodge a claim
£230 at start of hearing
Level 2 (unfair dismissal, equal pay & discrimination cases)
£250 to lodge a claim
£950 at start of hearing
Remission System
What’s new?
Reforms for:
TUPE Regulations
Collective consultation for large redundancies
New employment law cases
........ and finally
Written evidence wins employment cases !
Ensure that every stage of the employment
relationship is carefully and regularly documented
Appraisals, appropriate disciplinary warnings,
redundancy selection processes, grievance
procedures, etc.
If in doubt, write it out!
I said this
and he
said that ...
Status of Workers and Interns
Richard Cummings
Principal Consultant, HR Insight Ltd
What kind of relationship?
Employment
Relationship
Worker
Relationship
Self Employment?
Permanent employees
Fixed term (Temporary)
Apprenticeship schemes
Casual employees
Agency work
CIS
Freelance
Contractors
Interns
Status options 1
Permanent employees
Part time
Fixed term
Apprentices
Employment relationship
Right to written terms of employment
Mutuality of obligation
Minimum of 28 days paid holiday leave
Sick pay, redundancy, family friendly policies
Statutory or agreed notice periods
Disciplinary & grievance procedures
Unfair dismissal rights after 2 years
Status options 2
Casual workers
Agency workers
The self employed? – Freelancers and consultants
Interns
Limited companies
Worker relationship
Working Time Regulations 1998
Minimum of 28 days paid holiday leave
Minimum levels of breaks
Limits on weekly working hours
Casual workers: Rights when not casual
Agency workers: Rights from 1 October 2011
When to engage self employed people?
Cover fluctuations in workload
Cover during start up or expansion phases of the
business
One off projects that are unlikely to repeat
Bring in specific expertise (long or short term)
Deliver lower fixed overheads for the business
Low rights – potential higher long term costs
Interns
Paid
Unpaid
Test cases
Dangers of getting it wrong
Claims from the employee
Holiday pay
Notice periods
Redundancy
Claims from HMRC
National Insurance contributions
Unpaid tax
Any Questions?
Tel: 01708 758 958