Richard Bartlett - PPMA National Public Service Debate at the CIPD Conf - 10 Nov 2011

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


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


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


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


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.


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


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


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.


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


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


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.


What can NEST offer?


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


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


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


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 Retirement Date Funds

• Age-based investment funds to meet members’ needs

Your 2058 Retirement Fund




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


Charges - how will NEST compare?

5.8%

94.2%

Reduction in pot due to charges at NEST level

reduction due to charges

remaining fund


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 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


Employers can send enrolment and payments data via file uploads


NEST will automatically increase minimum contributions in line with ‘phasing’


Different people (or your advisers) can manage different parts of the process


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


Contact us

www.nestcorporation.org.uk

Business

Richard Bartlett - PPMA National Public Service Debate at the CIPD Conf - 10 Nov 2011