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Auto Enrolment : What we will do
The Auto Enrolment AdvisorAgenda
• Why it is happening?
• Technical Detail
• What will we do?
• Questions
The Auto Enrolment Advisor
• Do you know the Average Pension Fund Size in the UK?
The Auto Enrolment Advisor• 20 Years ago in Australia
• Average pension fund £24,000
• 20 Years later
• Average pension fund £300,000
The Auto Enrolment AdvisorTimetable
• Auto enrolment started from 1 October 2012
• Start date (known as the staging date) for individual employers depend on size and PAYE reference
The Auto Enrolment Advisor
The Auto Enrolment AdvisorWho is in?
The Auto Enrolment AdvisorAGE
Wag
e
<22 22-SPA SPA<
>£10,000 NON ELIGIBLE ELIGIBLEEE & ER ContributionsMust be enrolled
NON ELIGIBLE
£5,824-£10,000
NON ELIGIBLE
<£5,824 ENTITLED
EE & ER ContributionsCan ‘opt in’
EE & ER ContributionsCan ‘opt in’
EE & ER ContributionsCan ‘opt in’
EE Contributions onlyMay ‘opt in’
The Auto Enrolment AdvisorIn Plain English
• Some are in!• Some can come in!• Some might want to come in!
• Important point is each has to receive a letter.
The Auto Enrolment AdvisorContributions
• Based on pensionable earnings, where employer pension scheme meets minimum levels
Note Pensionable earnings means the higher of employer’s definition of pension earnings and basic pay. Basic pay excludes variable elements such commission, bonuses and overtime.
• 9% total with at least 4% from employer based on pensionable earnings, or
• 8% total with at least 3% employer, providing pensionable earnings are at least 85% of total earnings, or
• 7% total with at least 3% employer, providing pensionable earnings are 100% of total earnings
• The employer has to certify every 18 months that minimum contributions are met on the alternative basis.
Example 1Mr Jones is employed by Company 1 and receives a basic salary of £15,000 p/a with no other sources of income (bonus/commission).
Which contribution basis would be most beneficial for the employer?
Qualifying Earnings:£15,000 - £5,824 = £9,176 x 3% = £275.28Basic Pay:£15,000 x 4% = £600
£0
£100
£200
£300
£400
£500
£600
£700
275
600
Banded Earnings Basic Salary
Example 2Mrs Evans is employed by Company 2 and receives a basic salary of £15,000 p/a plus an annual bonus of £10,000.
Which contribution basis would be most beneficial for the employer?
Qualifying Earnings:£25,000 - £5,824 = £19,176 x 3% = £575.28Basic Pay:£15,000 x 4% = £600
Series1£100
£200
£300
£400
£500
£600
£700
575.28 600
Banded Earnings Basic Salary
Example 3Mr Adams is employed by Company 3 and receives a basic salary of £10,000 and commission of £45,000.
What contribution basis would be most beneficial for the employer?
Qualifying Earnings:£42,385 - £5,824 = £36,561 x 3% = £1,096.83Basic Pay:£10,000 x 4% = £400
Series1£100
£300
£500
£700
£900
£1,100
£1,300
1096.83
400
Banded Earnings Basic Salary
The Auto Enrolment AdvisorQualifying Workplace Pension Scheme (QWPS)
• All employers must automatically enrol eligible employees into a QWPS
• Note there will be no exemptions!
• Includes business owners employing their spouse!
• Where no QWPS already exists, the employer has to designate an alternative for auto enrolment.
The Auto Enrolment AdvisorPenalties
The Pension Regulator will have the ability to impose penalty notices if an employer does not comply with their new duties• Fixed penalty of £400 where an employer fails to respond to
a warning notice from The Pension Regulator• An escalating penalty of £50 to £10,000 a day (depending on
the size of the employer). For example if the employer fails to pay contributions on time• Fixed penalty of £1,000 to £5,000 for prohibited recruitment
conduct, for example where an employer screens job applicants for their intention to join the pension scheme.
The Auto Enrolment AdvisorAuto Enrolled Scheme
• Some existing schemes may already qualify.
• Opt outs have to be re enrolled again three years later.
• 3 month postponement period.
• If an employee volunteers to rejoin, the employer must allow this at least once a year.
The Auto Enrolment AdvisorHow would we map the solution?
1. Initial Assessment• Confirm Staging date• Establish relative points of contact for payroll, pension providers
and GCR• Identify employee status• Confirm definition of Pensionable Pay – Banded Earnings or Tiered
Options• Establish the minimum requirements to comply with Auto
Enrolment legislation• Demonstrate how the various options will impact future cash flow• Provide report detailing the various options
The Auto Enrolment AdvisorHow would we map the solution?2. Scheme Design for Auto Enrolment
• Discuss options around Auto Enrolment providers• Assess existing pension scheme (if applicable)• Obtain terms from Providers• Select Provider and make recommendation based on
core values of the company
The Auto Enrolment AdvisorHow would we map the solution?3. Administration Process
• Consult with Payroll provider and assess current software• Consider existing contractual arrangements (interaction
of existing benefits)• Consider Payroll process and identify and recommend
their responsibilities
The Auto Enrolment AdvisorHow would we map the solution?4. Member Communications
• Agree a communications strategy• Evaluate what letters have to be sent and to whom• Distribute the correct letters to the appropriate
employees in a timely fashion
The Auto Enrolment AdvisorHow would we map the solution?5. Implementation• Test Software• Scheme Certification• Register Qualifying Schemes • Complete Declaration of Compliance
The Auto Enrolment AdvisorHow would we map the solution?6. Annual Compliance Audit
• Review previous year to assess that all requirements from TPR are being fulfilled• Assess alterations that were made to the scheme to
ensure compliance• Answer any queries that Payroll have in regards to the
scheme
The Auto Enrolment AdvisorSummary
• It all starts with information!
• Staging Date, Segment Employees & Know costs
• Communication is key!
• Advice (Tread with care)
• TPR are on the lookout for discouraging employees to join
Auto Enrolment : What we will do
