Upload
others
View
2
Download
0
Embed Size (px)
Citation preview
Hymans Robertson LLP is authorised and regulated by the Financial Conduct Authority
Norfolk Pension Fund
Governance, Freedom and Choice, Auto Enrolment, Employer Responsibility
John Wright
26 November 2014
2
What will be covered ?
New Governance Regime
Freedom and Choice
Auto Enrolment
Employer Responsibility
4
Remember me?
5
Outcome
Pension board (1) “establishment of a board” (a) “secure compliance with the LGPS” (b) secure compliance with requirements imposed…by the Pensions Regulator. (c) other matters.
Public Services Pensions Act 2013 - Regulation 5
7
Current Fund governance structure Secretary of State
(Communities and Local Government)
Administering Authority Technical professional advice and guidance
(e.g. LGE, CIPFA) Pension Committee (s.101 responsibility - decision making,
funding strategy, etc)
Officers (carrying out actions on behalf of panel
and S151 responsibility)
8
Future LGPS governance structure HM Treasury
Responsible Authority (Secretary of State)
tPR (codes of practice on governance,
administration, etc.)
National Scheme Advisory Board
Qualified person
Administering Authority Technical professional advice and guidance
(e.g. LGE, CIPFA)
Sub groups
Pension Committee (s.101 responsibility)
Officers (s.151 responsibility)
Pension Board
9
Formation of Pension Board
Pension Board • Assist the Scheme Manager in securing compliance with:
• “Scheme” regulations • Legislation relating to governance and administration • Pension Regulator’s requirements e.g. Code of Practice
• To ensure effective and efficient governance and administration
Administering Authority
Pension Committee (s.101 responsibility)
Officers (s.151 responsibility)
Pension Board
10
Pension Board Requirements • Prescribed in scheme rules • Assists the Scheme Manager in securing
compliance
• Equal number of scheme member and employer representatives
• No conflict of interest
• Experience and capacity
11
Local pension board cont’d Have regard to guidance issued by Secretary of State
Purpose – roles & responsibilities Determining constituencies for representation Appointments / terms of office / attendance / terminations Number of meetings Reporting requirements Whistle blowing mechanisms Information Payments
Complying with the Pension Regulator’s Code of Practice
(Scheme advisory board may provide further guidance)
12
What does this all mean?
Oversight and attention of the pension board and help with tPR requirements.
Changes intended to raise standards elsewhere in the LGPS.
13
The next steps
Go live
Determine approach and explore options based on draft regulations
Regulations and tPR’s Code of Practice
Finalise set up
Implement – appointments
Council approval
Inductions
A bit of work to do
15
Remember me?
Introduced auto enrolment Ending contracting out Freedom and choice Higher state pension
16
How does it work?
Individual in Defined Benefit
scheme at age 55
Unlock cash via Defined Contribution
scheme
Individual in Defined
Contribution scheme at age 55
Tax considerations Freedom and choice
17
Example
Transfer of entire pension pot of approximate value £150,000
(ignores tax)
Employee currently aged 55
£10,000 p/a
DB pension from age 65
18
Who will it benefit?
Flexibility will be attractive to significant minority Bring spending forward Different ‘shape’ of spending Flexibility Control Investment returns
Inheritance Supporting younger or older generations Tax free cash typically 25% higher Integrating with part time work and phased retirement Pay off debts/mortgage
19
Impact on scheme employers
Scheme and employer considerations Getting best value for members from existing spend Members making right choices for them Risk reduction tool Workforce management tool for employer Potential savings
Flexibility will become commonplace: a win-win if terms set fairly
21
Putting flexibility in place in the private sector Key considerations
Guidance for members
Terms of offer
Target membership
Communications
Investment strategy
Pensions Committee
Ensure employees make the most of their benefits
22
Impact on LGPS
Similar to private sector?
How much gets paid out? CETV’s?
Impact on: Contributions? Funding levels? Cashflows and investment strategy? Risk for employers? AVC’s?
24
Background Fewer workers supporting retired population
10:1 in 1901, expected to fall to 2:1 by 2050 Increased cost of providing State Pensions
Encourage greater private sector retirement saving
New legal duties on employers
Phased in for employers from 1 October 2012 Smallest by April 2017
DWP responsible for roll-out
25
Staging dates
Number of employees in largest PAYE scheme
From October 2012 for larger employers
Consider postponement or transitional period ?
26
When is your staging date? PAYE Scheme size Staging date Alternative staging date 120,000 or more 1 October 2012 1 August 2015 50,000 to 119,999 1 November 2012 1 August 2015 30,000 to 49,999 1 January 2013 1 October 2015 20,000 to 29,999 1 February 2013 1 October 2015 10,000 to 19,999 1 March 2013 1 January 2016 6,000 to 9,999 1 April 2013 1 January 2016 4,100 to 5,999 1 May 2013 1 February 2016 4,000 to 4,099 1 June 2013 1 February 2016 3,000 to 3,999 1 July 2013 1 March 2016 250 to 2,999 1 August 2013 to 1
February 2014 1 March 2016 to 1 July 2016
< 250 1 April 2014 to 31 March 2017
1 July 2016 to 1 April 2017
27
ELIGIBLE JOBHOLDERS AGED 22-SPA EARN £10,000 PLUS AUTO ENROL
NON ELIGIBLE JOBHOLDERS AGED 16-75 EARN £5,772 to £10,000 CAN OPT TO JOIN
ENTITLED WORKERS AGED 16 – 75 EARN LESS THAN £5,772 CAN OPT TO JOIN
Categorising workers
28
Categorising workers
Non-eligible job holders
Entitled workers
Non-eligible job holders
Non-eligible job holders
75
SPA
22
16
£5,772 Lower earnings
threshold
£10,000 Earnings trigger
£41,865 Upper earnings
threshold
Age
Earnings
Opt-in to a scheme (LGPS)
Opt-in to Qualifying Scheme (LGPS)
Auto-enrol to Qualifying Scheme (LGPS)
Qualifying Earnings
Eligible job holders
29
Inducements & prohibited conduct
Effective from 1 July 2012 (so already in place) What’s included
Prohibited recruitment conduct Inducement to opt out of LGPS Unfair treatment of workers
What are the sanctions? Pensions Regulator compliance notice Penalties
30
BIG Money penalties for non compliance Fixed penalty notice of £400 Prohibitive recruitment notice Based on number of workers – but in total no more than £50,000 Escalating penalty notice £50 to £2.500 per day for less than 250 workers £5,000 per day for 250 plus workers £10,000 per day for 500 or more workers Possible imprisonment
Equates to £70,000 per week or £3.64 million per year !
31
Financial Impact on Employers
Before auto-enrolment: Approximately 70% of employees were in the scheme
After auto-enrolment: Approximately 90% of employees are in the scheme More cash required, around 30%!!
34
Every one has a part to play
Get contributions right
Paying the right pension
Sticking to procedures
Keep the people who need to know informed
Meet deadlines
Data is up to date and relevant
35
More important than ever
Greater tPR oversight
Complexities of new CARE scheme Greater emphasis on yearly record keeping Less flexibility for adjustments to be made at date of retirement
37
Reliances and Limitations This presentation is addressed to Norfolk County Council for its sole use as Administering Authority and not for the purposes of advice to any other party; Hymans Robertson LLP makes no representation or warranties to any third party as to the accuracy or completeness.
This presentation discusses the current issues in the LGPS and was prepared purely for illustration to employers. Hymans Robertson LLP accepts no liability for any other purpose of this presentation, for instance employers considering their own auto-enrolment requirements.
The following Technical Actuarial Standards* are applicable in relation to this presentation and have been complied with where material:
TAS R – Reporting; TAS D – Data; TAS M – Modelling; and Pensions TAS.
* Technical Actuarial Standards (TASs) are issued by the Financial Reporting Council and set standards for certain items of actuarial work, including the information and advice contained here.