DM2594051 v1AThis presentation remains the property of The Pensions Regulator. The content of these slides should not be altered in any way.
Automatic Enrolment webinar- Systems & Schemes
Welcome
26th September 2013
DM2594051 v1AThis presentation remains the property of The Pensions Regulator. The content of these slides should not be altered in any way.
Since the recording of this webinar there have been a number of changes:
Automatic enrolment
• registration is now referred to as “declaration of compliance” 24 June 2014
• changes in legislation - 1 April 2014
The principles described in the webinar remain the same. The changes are:
• the deadline for completing your declaration of compliance (registration) with the regulator has been extended to five calendar months
• the period for completing automatic enrolment (joining window) has been extended to six weeks
• a new definition of a pay reference period has been introduced which allows employers to choose to align the assessment of their workers to tax weeks or tax months
• the deadline for a number of the information requirements has been extended to six weeks www.tpr.gov.uk/docs/resource-info-to-workers.pdf
• the opt-out period remains as one calendar month.
For the earnings thresholds for the current tax year visit our website at: www.tpr.gov.uk/earnings-thresholds.
DM2594051 v1AThis presentation remains the property of The Pensions Regulator. The content of these slides should not be altered in any way.
Since the recording of this webinar there have been a number of changes in automatic enrolment legislation. The principles described remain the same. The changes are:
Automatic enrolmentChanges in legislation - 1 April 2014
• The deadline for completing declaration of compliance (registration) with the regulator has been extended to five calendar months.
• The period for completing automatic enrolment (joining window) has been extended to 6 weeks
• A new definition of a pay reference period has been introduced which allows employers to choose to align the assessment of their workers to tax weeks or tax months
• The deadline for a number of the information requirements has been extended to 6 weeks www.tpr.gov.uk/docs/resource-info-to-workers.pdf
• The Opt-out window remains as one calendar month.
• For the earnings thresholds for the current tax year visit our website at: www.tpr.gov.uk/earnings-thresholds
The information we provide is for guidance only and should not be taken as a definitive interpretation of the law.
DM2594051 v1AThis presentation remains the property of The Pensions Regulator. The content of these slides should not be altered in any way.
Scope of the webinar
• Introduction
• Your pension arrangements
• Your payroll & IT systems
• The questions you might need to ask to ensure these systems work together
• Who will be involved and what will be their role
DM2594051 v1AThis presentation remains the property of The Pensions Regulator. The content of these slides should not be altered in any way.
Automatic Enrolment legislation give employers a duty to:
Automatically enrol all Eligible Jobholders
Communicate to workers providing timely and appropriate information
Allow Non Eligible Jobholders to Opt-in and Entitled Workers to Join
Facilitate Opt Outs within the opt out period and promptly refund contributions
Complete declaration of compliance (registration) with The Pensions Regulator
Keep records
Maintain contributions
Automatically re-enrol all eligible jobholders every three years
The Employee Safeguards state that employers:
Must not induce workers to opt out or cease membership of a scheme
Must not indicate to a potential jobholder that their decision to opt out will affect the outcome of the recruitment process
Overview of legal duties & employee safeguards
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Staging profile (volumes of employers & workers)
ERSP Staging Profile set 19 January 2012, forecast on 1 April 2012 data
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Sep-12
Dec-12
Mar-13
Jun-13
Sep-13
Dec-13
Mar-14
Jun-14
Sep-14
Dec-14
Mar-15
Jun-15
Sep-15
Dec-15
Mar-16
Jun-16
Sep-16
Dec-16
Mar-17
Jun-17
Sep-17
Dec-17
Mar-18
Empl
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1 Empl
oyer
s pe
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Total employers required to complete declaration of compliance (registration) Employees to be assessed ('000s)
Average of 10,000 medium size employers staging
each month in April, May & July 2014
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Nu
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DM2594051 v1AThis presentation remains the property of The Pensions Regulator. The content of these slides should not be altered in any way.
Payroll & IT systems
Automatic Enrolment webinar- Systems & Schemes
DM2594051 v1A The content of these slides should not be altered in any way.
No
STEP 1
Assessment Date
Are they anActive Member of
a QualifyingScheme?
Total QE paid in PRP > earnings
trigger ?
Yes
Yes
No
No
Agedbetween22 andSPA?
Are theyexcluded from Assessment† ?
No statutory duty to enrol
No Yes
Yes
STEP 2
Automatic Enrolment
No statutory duty to enrol
22nd Birthday in this PRP??
No
New Assessment Date = 22nd Birthday
New Assessment Date = 1st day of next PRP
Yes
New Assessment Date = 1st day of next PRP
Not an eligible jobholder
Not an eligible jobholder
† A person would be excluded if they:• are not a UK worker; or• are under 16 or aged 75 or over; or• do not need to be assessed yet (e.g. subject to Postponement, Transitional Period or only need to be assessed on Re-enrolment dates).
SPA – State Pension AgeQE – Qualifying Earnings
PRP – Pay Reference Period
In Step 1, given the Assessment Date, determine if the person
needs to be automatically enrolled under the legislation:
If you can answer the question in any ONE of the diamond boxes to reach a yellow lozenge, then
the person does not have to be automatically enrolled under the legislation (yet).
Otherwise, if you have answered all possible questions,
proceed to Step 2.
DM2594051 v1A The content of these slides should not be altered in any way.
In Step 2, the employer needs tocarry out automatic enrolment.
The deadline for all activities is one month from the Assessment Date,
but the employee contributions need to be taken on the first payday
on or after the Assessment Date.
Pension scheme contributions will be calculated based on scheme rules
and dated from the Assessment Date to the end of the
Pay Reference Period (PRP)
STEP 1
Assessment Date
STEP 2
Automatic Enrolment
Scheme administrator setsup Active Membership / sends scheme T&Cs
Issue enrolment letter to eligible jobholder
Employee contributions deducted from first pay
DM2594051 v1A The content of these slides should not be altered in any way.
STEP 2
Automatic Enrolment
22nd Birthday in this PRP??
No
New Assessment Date = 22nd Birthday
New Assessment Date = 1st day of next PRP
Issue enrolment letter to eligible jobholder
Employee contributions deducted from first pay
Scheme administrator setsup Active Membership / sends scheme T&Cs
No
STEP 1
Assessment Date
Are they anActive Member of
a QualifyingScheme?
Yes
Yes
No
No
Agedbetween22 andSPA?
No statutory duty to enrol
No Yes
Yes
No statutory duty to enrol
Not an eligible jobholder
Not an eligible jobholder
Total QE paid in PRP > earnings
trigger ?
Are theyexcluded from Assessment† ?
New Assessment Date = 1st day of next PRP
DM2594051 v1A The content of these slides should not be altered in any way.
AE process
Assessment results
Payment£
Payroll data£
Payroll instructions
£Pension Scheme
Rules£
Enrolmentletter to worker
Enrolmentinstructions to pension provider
DM2594051 v1A The content of these slides should not be altered in any way.
AE process
Assessment results
Payment£
Payroll data£
Payroll instructions
£Pension Scheme
Rules£
Enrolmentletter to worker
Enrolmentinstructions to pension provider
Some payroll software systems can do the assessment
and calculate contributions.
DM2594051 v1A The content of these slides should not be altered in any way.
AE process
Assessment results
Payment£
Payroll data£
Payroll instructions
£Pension Scheme
Rules£
Enrolmentletter to worker
Enrolmentinstructions to pension provider
Alternatively, assessment and
contribution calculations may
be done by non-payroll software
(“middleware”)
DM2594051 v1A The content of these slides should not be altered in any way.
AE process
Assessment results
Payment£
Payroll data£
Payroll instructions
£Pension Scheme
Rules£
Enrolmentletter to worker
Enrolmentinstructions to pension provider
Middleware, in addition to doing the
assessment and contribution
calculations, may also handle communications
with your pensions scheme(s) and issue letters to workers.
Some pension scheme
providers may offer
“middleware” assessment
services.
DM2594051 v1A The content of these slides should not be altered in any way.
AE process
Assessment results
Payment£
Payroll data£
Payroll instructions
£Pension Scheme
Rules£
Enrolmentletter to worker
Enrolmentinstructions to pension provider
However, some middleware systems
may do the assessment and
communications, but expect the employer
to calculate contributions
DM2594051 v1A The content of these slides should not be altered in any way.
Yes
Are they anEligible
Jobholder?
No statutory duty to enrol
No
30th
C
1st
R P0 C
1st
R C
1st
R P2
30th 31st
Yes
Total QE paid in PRP > earnings
trigger ?
No
Assessment Day
Scenario after Postponement
• Pay Reference Period (PRP) runs from 1st to last day of each month;• Assessment date on 31st May is the last day of the Pay Reference Period and is after the May payday on 28th;
• Total Qualifying Earnings will already be known.
If the worker needs to be automatically enrolled:• First deduction needs to made in the next payday - P2 on 28th June;
• Opt Out window will start before first deduction taken;
• Contribution based on 100% of June pensionable pay + 1/31 of May pay
Key: C – Payroll cutoffR – Payroll runP – Payday
Opt Outwindow starts
P1
April May June
Issue letter to worker &set up Active Membership
Automatic Enrolment triggered
28th 28th 28th
Scenario
Postponementto the last day of PRP
Monthly Pay Reference Period (PRP)
DM2594051 v1AThis presentation remains the property of The Pensions Regulator. The content of these slides should not be altered in any way.
Questions to consider
In practice, employers will almost certainly need some software automation.
Do you intend to use your payroll software to assess your workers? Can your payroll provider provide this assessment on your product & version? Or would you need to upgrade your payroll system to do this?
Or, are you going to get another supplier to carry out the assessments (e.g. pension scheme provider or other non-payroll / middleware provider)?
Will all of the software do what you need it to do?
How will you automate staff communications (e.g. a ‘mail merge’ software tool)?
Can your IT / computer systems cope, if you need to run additional software?
Where is your data stored (e.g. on an integrated HR/payroll system or separately)?
How accurate and up to date is your employee data (e.g. NI, address, etc)?
How will these systems work together – what data standards do they support?
Talk to your existing providers and any possible new suppliers about this, well in advance of your staging date.
DM2594051 v1AThis presentation remains the property of The Pensions Regulator. The content of these slides should not be altered in any way.
Questions to ask suppliers
Does the system support the following:
Communications with workers (e.g. does it generate/issue letters or just produce a list of workers that need letters)?
Does it calculate pension contributions and for what definitions of pensionable pay?
Can the software calculate less than a whole period pension contribution (e.g. calculate a pro-rata contribution if a worker is enrolled into the scheme mid-way through the PRP – they may be turning 22 years old)?
Can the software calculate more than a whole period pension contribution (e.g. can you use Postponement to the last day of the PRP)?
What flexibility is there - configuring different Postponement rules for various scenarios?
What data standards are supported / what pension schemes can it connect with?
For middleware assessment software only:
What payroll systems will it support (e.g. data formats used for input & output) ?
If you have more than one AE scheme – and will use a pension provider’s middleware : Will the software assess workers who would be enrolled into another provider’s pension
scheme, if they triggered automatic enrolment?
DM2594051 v1AThis presentation remains the property of The Pensions Regulator. The content of these slides should not be altered in any way.
Planning timeline 08 01 May 2014
Your declaration of compliance (registration) deadline
02 Sep 2014
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DM2594051 v1AThis presentation remains the property of The Pensions Regulator. The content of these slides should not be altered in any way.
Who is responsible - develop a plan
To ensure they can comply with their duties, employers are likely to have to consider:
HR issues (e.g. employment & non-employee contracts, employee data accuracy, employee benefits policies, new joiner processes, staff communications, etc);
Pensions issues (e.g. impact on existing pensions schemes & their members, whether to use an existing scheme or a new scheme for automatic enrolment, etc);
Payroll issues (e.g. pay cycles, payroll cut-offs, payroll data accuracy, refunds, contribution calculations, processes which span tax years, etc);
Information Technology (IT) issues: (e.g. computer systems, reliability & networking issues, data standards to allow different software/systems to work together, etc);
Procurement issues: (e.g. any plans to buy new IT systems/software or pensions schemes or upgrade/change existing systems/software, etc);
Financial issues: (e.g. forecasting and budgeting for any impact on costs, etc).
Employers should make sure they involve the right people in their own organisation and in all their suppliers (or potential suppliers).
DM2594051 v1AThis presentation remains the property of The Pensions Regulator. The content of these slides should not be altered in any way.
Pension Schemes
Automatic Enrolment webinar- Systems & Schemes
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Pension schemes types
• Pension schemes can be either: Defined Contribution (DC) – e.g. ‘money purchase’ Defined Benefit (DB) – e.g. ‘Final Salary’ or ‘Career Average’ Hybrid – a mix of DB and DC
• An Automatic enrolment scheme must be used for:
the automatic enrolment of Eligible Jobholders; the enrolment of any Jobholders who ‘Opt In’.
• Qualifying schemes
If an existing scheme is not a Qualifying Scheme :
Scheme members would need to be automatically enrolled into an Automatic Enrolment scheme, if they are Eligible Jobholders.
Employers may want to change the contributions levels and/or scheme rules of their existing schemes to make them qualifying.
DM2594051 v1AThis presentation remains the property of The Pensions Regulator. The content of these slides should not be altered in any way.
What pension schemes can be used?
Scheme for
Entitled Workers scheme is
registered
must be registered in the UK or EEA†
must have no barrier to automatic enrolment must be a Qualifying Scheme
Automatic Enrolment Scheme
Qualifying Scheme
must be tax registered; and meet minimum criteria
Workers already active members of a Qualifying Scheme do not need to be
automatically enrolled
Must be used for automatic
enrolment and ‘Opt Ins’
Employers are not required to make an
employer contribution
Employers will need to contribute
to the pension scheme Employers may
also use a Qualifying Scheme
or an Automatic Enrolment Scheme
for Entitled Workers
† European Economic Area states
DM2594051 v1AThis 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
May2017
April2014
Oct 2018
Oct 2012
Oct 2017
June2015
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
DM2594051 v1AThis presentation remains the property of The Pensions Regulator. The content of these slides should not be altered in any way.
Review your pensions
Employers should consider what they need to do about their pension schemes. For your existing pensions scheme (if you have one):
Are there any existing active members (e.g. members currently contributing)? Could any of the existing members be (or become) Eligible Jobholders? Does the scheme satisfy the minimum criteria?
See: www.tpr.gov.uk/employers/explaining-qualifying-schemes.aspx Do you want to use this scheme as an automatic enrolment scheme? ...
... your existing scheme provider may not allow it be made an automatic enrolment scheme (e.g. the scheme provider needs to issue Opt Out forms).
If you need to or want to use a new scheme for automatic enrolment: How will you choose the scheme provider, scheme and default fund?
See: www.tpr.gov.uk/docs/selecting-a-good-automatic-enrolment-scheme.pdf Some scheme providers may not wish to offer you a pension scheme. Providers may be at full capacity – or have long waiting times.
NEST are obliged to offer you a pension scheme ... but don’t leave it too late!
DM2594051 v1AThis presentation remains the property of The Pensions Regulator. The content of these slides should not be altered in any way.
Choosing a good quality scheme
Scheme simplicityWorkers should be able to understand the scheme
(but if they don’t make any decisions they are still
protected).Investment
optionsIs the default
investment strategy suitable?
Managing Investments
Know who is responsible for
monitoring these default strategies.
Value for moneyAre the costs and
charges competitive and good value for the services provided
Pension ProviderThe skills,
knowledge and processes of those
running your pension scheme
are vital.
CommunicationsThe scheme provider should regularly send
good quality communications to
members
What makes a good quality
scheme?
DM2594051 v1A This presentation remains the property of The Pensions Regulator. The content of these slides should not be altered in any way
Useful Links• Main steps to prepare for automatic enrolment
www.tpr.gov.uk/employers/main-steps.aspx
• Detailed guides for Employers (and pension professionals):
www.tpr.gov.uk/pensions-reform/detailed-guidance.aspx
• Planning for Automatic Enrolment www.tpr.gov.uk/employers/planning-for-automatic-enrolment.aspx
• What information do employers need to provide to their workers? www.tpr.gov.uk/docs/Pensions-reform-resource-information-to-workers.pdf
• Letter templates for employers: www.tpr.gov.uk/employers/letter-templates-for-employers.aspx
• Information about declaration of compliance (registration) and employer checklist: www.thepensionsregulator.gov.uk/employers/registration.aspx www.tpr.gov.uk/docs/automatic-enrolment-online-registration-checklist.pdf
• Logo for Automatic Enrolment (“3 coins”): (choose “I only require automatic enrolment assets”)
https://communicationcentre.dwp.gov.uk/dwp/index.php
• Detailed guides for Software Developers:www.tpr.gov/employers/software-developers.aspx
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