Pensions - automatic

enrolment - choosing a

provider and making

contributions

Karen Thomson MSc FCIPP FHAE – Director

Group Payroll Services

4 September 2015

• Around 3,000 businesses have staged

• January to April 2016

– Approximately 110,000 to stage!

The story so far

Perspective

What do I need to consider?

Does my

existing scheme

qualify?How do I

choose a

pension

scheme?

Do I have

to have a

pension

scheme?

How long have

I got?

• Minimum criteria for qualifying scheme

• Automatic enrolment

– Qualifying and no barrier to entry

Qualifying v automatic enrolment

• Occupational or personal pension

scheme

• Tax registered

• Meet minimum requirements

Qualifying criteria

• Employer must make contributions in

respect of jobholder (employee)

• Minimum contribution must be at least

8% of qualifying earnings (steady state)

• Minimum employer contribution of 3%

– Relevant pay reference period

Minimum requirements for DC

(occupational)

DM2632044 v2C This presentation remains the property of The Pensions Regulator. The content of these slides should not be altered in any way.

Min DC 8%

total*

Min DC 5%

total*

Minimum DC 2% total contribution*

DC Scheme Minimum Contributions

May

2017

April

2014

Oct

2018Oct

2012

Oct

2017June

2015

Large

employers

Medium

employers

Small/micro

employers

New born

Employers

* % of Qualifying Earnings

Feb

2018

Minimum DC 1% employer contribution*

Min DC 2%

employer*

Min DC 3%

employer*

Phase 1

Phase 2 Phase 3

Pay components

Salary Commission

Wages Bonuses

Overtime SSP

SMP SAP

ShPP SPP

Normal pensionable pay has looked much different

DM2632044 v2C This presentation remains the property of The Pensions Regulator. The content of these slides should not be altered in any way.

DC Self Certification during Phasing period

Up to

1st Oct 2017

1st Oct 2017

to 30th Sept

2018

From

1st Oct 2018

Pensionable Salary

(Basis of

% Contributions)

Tier / Set

1

2% Employer

/ 3% Total

3% Employer

/ 6% Total

4% Employer

/ 9% Total

Scheme Definition

(if >= basic pay from £1)

Tier / Set

2

1% Employer

/ 2% Total

2% Employer

/ 5% Total

3% Employer

/ 8% Total

85% of Total Pay

(scheme average)

Tier / Set

3

1% Employer

/ 2% Total

2% Employer

/ 5% Total

3% Employer

/ 7% Total

100% of

Total Pay

Qualifying earnings 2015-16

DM2632044 v2C This presentation remains the property of The Pensions Regulator. The content of these slides should not be altered in any way.

Example – Minimum requirements scheme (based on Qualifying Earnings in 2013/14)

Tax YearPay Reference

Period Lower Earnings

ThresholdEarnings trigger for

automatic enrolmentUpper Earnings

Limit

2013/14 1 month £473.00 £787.00 £3,454.00

Pay Reference Period

(Monthly)Basic Salary

TotalQualifying

Earnings (QE)

Pensionable Earnings

(QE – LET)†

Employer Pension Contribution (Er)

Employee Pension Contribution (Ee)

Total Pension Contribution

Worker Category (if aged between 22 and

State Pension Age)

Apr-13 £800.00 £800.00 £327.00 £3.27 £3.27 £6.54 Eligible Jobholder

May-13 £400.00 £400.00 £0.00 £0.00 £0.00 £0.00 Entitled Worker

Jun-13 £474.00 £474.00 £1.00 £0.01 £0.01 £0.02 Non Eligible Jobholder

Jul-13 £0.00 £0.00 £0.00 £0.00 £0.00 £0.00 Entitled Worker

Aug-13 £473.01 £473.01 £0.01 £0.01 £0.00 £0.01 Non Eligible Jobholder

Sep-13 £925.50 £1,234.00 £761.00 £7.61 £7.61 £15.22 Eligible Jobholder

Oct-13 £787.00 £787.00 £314.00 £3.14 £3.14 £6.28 Non Eligible Jobholder

Nov-13 £466.00 £4,234.00 £2,981.00 £29.82 £29.81 £59.63 Eligible Jobholder

Dec-13 £0.00 £0.00 £0.00 £0.00 £0.00 £0.00 Entitled Worker

Jan-14 £500.00 £500.00 £27.00 £0.27 £0.27 £0.54 Non Eligible Jobholder

Feb-14 £522.00 £2,123.00 £1,650.00 £16.50 £16.50 £33.00 Eligible Jobholder

Mar-14 £455.00 £455.00 £0.00 £0.00 £0.00 £0.00 Entitled Worker

£5,802.51 £11,480.01 £6,061.01 £60.63 £60.61 £121.24

Scheme Contributions1% Er + 1% Ee = 2% Total

Total annual Qualifying Earnings £11,480.01

Less Lower Earnings Threshold -£5,668.00

Total annual Pensionable Earnings £5,812.01

Contributions if calculated annually

EmployerContribution

(Er) = 1%

EmployeeContribution

(Ee) = 1%

Total Pension Contribution =

2%

£58.13 £58.12 £116.25

Annual calculation differs from totals

of each PRP

†Capped at Upper Earnings Threshold minus LET

DM2632044 v2C This presentation remains the property of The Pensions Regulator. The content of these slides should not be altered in any way.

Example – Self Certified pension scheme (based on Tier 2 & basic salary only)

Tax YearPay Reference

Period Lower Earnings

ThresholdEarnings trigger for

automatic enrolmentUpper Earnings

Limit

2013/14 1 month £473.00 £787.00 £3,454.00

Pay Reference Period

(Monthly)Basic Salary

Total Qualifying

Earnings (QE)

Pensionable Earnings

(basic salary)

Employer Pension Contribution (Er)

Employee Pension Contribution (Ee)

Total Pension Contribution

Worker Category (if aged between 22 and

State Pension Age)

Apr-13 £800.00 £800.00 £800.00 £8.00 £8.00 £16.00 Eligible Jobholder

May-13 £400.00 £400.00 £400.00 £4.00 £4.00 £8.00 Entitled Worker

Jun-13 £474.00 £474.00 £474.00 £4.74 £4.74 £9.48 Non Eligible Jobholder

Jul-13 £0.00 £0.00 £0.00 £0.00 £0.00 £0.00 Entitled Worker

Aug-13 £473.01 £473.01 £473.01 £4.74 £4.73 £9.47 Non Eligible Jobholder

Sep-13 £925.50 £1,234.00 £925.50 £9.26 £9.25 £18.51 Eligible Jobholder

Oct-13 £787.00 £787.00 £787.00 £7.87 £7.87 £15.74 Non Eligible Jobholder

Nov-13 £466.00 £4,234.00 £466.00 £4.66 £4.66 £9.32 Eligible Jobholder

Dec-13 £0.00 £0.00 £0.00 £0.00 £0.00 £0.00 Entitled Worker

Jan-14 £500.00 £500.00 £500.00 £5.00 £5.00 £10.00 Non Eligible Jobholder

Feb-14 £522.00 £2,123.00 £522.00 £5.22 £5.22 £10.44 Eligible Jobholder

Mar-14 £455.00 £455.00 £455.00 £4.55 £4.55 £9.10 Entitled Worker

£5,802.51 £11,480.01 £5,802.51 £58.04 £58.02 £116.06

Scheme Contributions1% Er + 1% Ee = 2% Total

Total annual Qualifying Earnings £11,480.01

Less Lower Earnings Threshold N/A

Total annual Pensionable Earnings £5,802.51

Contributions if calculated annually

EmployerContribution

(Er) = 1%

EmployeeContribution

(Ee) = 1%

Total Pension Contribution =

2%

£58.04 £58.02 £116.06

Annual calculation is the same as the

totals of each PRP

• Assessment of workers

• Assessment of worker’s pay

• Scheme rules i.e. Tier 1, 2 or 3

• Salary sacrifice

Pension contribution deductions

• What will you offer?

– Worker Assessment

– Pension provider communications

– Employee communications

– TPR Declaration of Compliance ( every 3 years anniversary)

– Record Keeping

– Postponement?

• What will it cost?

– Software

– Training

– Additional processing time

Designing your service

• See some of the team on the stand

• Factsheet in your packs

• Armstrong Watson Financial Planning

Services

• Armstrong Watson Payroll Services

• The Pensions Regulator

Help is available

• Aesupport@armstrongwatson.co.uk

• www.armstrongwatsonfp.co.uk or

telephone 0808 144 5575 to be directed

to your local office

Armstrong Watson

DM2632044 v2C This presentation remains the property of The Pensions Regulator. The content of these slides should not be altered in any way.

Useful Links

• Automatic enrolment guidance and tools

www.thepensionsregulator.gov.uk/employers.aspx

• Planning for Automatic Enrolment

www.tpr.gov.uk/employers/planning-for-automatic-enrolment.aspx

• Know your workforce

www.tpr.gov.uk/employers/know-your-workforce.aspx

• Detailed guides for Employers (and pension professionals):

www.tpr.gov.uk/doc-library/automatic-enrolment-detailed-guidance.aspx

• What will automatic enrolment cost me?:

www.tpr.gov.uk/employers/what-will-automatic-enrolment-cost-me.aspx

• What information do employers need to provide to their workers?

www.tpr.gov.uk/docs/Pensions-reform-resource-information-to-workers.pdf

• Information about Registration and employer checklist:

www.tpr.gov.uk/employers/registration.aspx

www.tpr.gov.uk/docs/automatic-enrolment-online-registration-checklist.pdf

• Letter templates for employers:

www.tpr.gov.uk/employers/letter-templates-for-employers.aspx