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The Automatic Enrolment Challenge

15.10 – 15.35. The Automatic Enrolment Challenge. Neil Mutton Director, Q & A People Matter. www.ifa.org.uk. The Automatic Enrolment Challenge Neil Mutton Director Q&A People Matter Ltd. www.qnapm.com .

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The Automatic Enrolment Challenge

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  1. 15.10 – 15.35 The Automatic Enrolment Challenge • Neil Mutton • Director, Q & A People Matter • www.ifa.org.uk

  2. The Automatic Enrolment Challenge • Neil Mutton • Director • Q&A People Matter Ltd www.qnapm.com

  3. - Current statistics- Whatis the pending demand ?- Planning for success- Pension Scheme options - Complianceand Record Keeping solutions- Employer types emerging What will be answered in this session

  4. Who are Q&A People Matter • Employee Benefits • HR services • Payroll • Financial Advice & Education • 40 staff, London, Dubai, Isle of Man

  5. Accountants are key to your Clients success • First port of call for most things • Probably run payroll for them • Understand their business • Help them budget • Take the pain away … • They will need guidance !

  6. Auto Enrolment is a complex Project Plan ! • Employee Benefits • Finance / Budgeting • HR / Contracts, Handbooks • Payroll / Complexity & Process • Communication & Education • Staff Reward and Motivation • Timelines , Milestones, Deliverables

  7. Staging profile (volumes of employers) Source: The Pension Regulator, Feb 2014

  8. In Summary Automatic Enrolmentlegislation 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 • Automatically re-enrol all eligible jobholders every three years • Complete registration with the Pensions Regulator • Keep records • Maintain contributions Employers : • Must notinduce 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

  9. Do you know your clients situation ? • Staging Date • Business Complexity • Time to go to reach staging date • Budget • Pre – staging date activities • For ongoing Pension contributions • How will they communicate to their staff ? • Who will do all the work ? • How will you offer guidance ? • Work with experts ? • DIY ? • Key decisions cannot be left until the lastminute

  10. Phasing the minimum contributions: Now - 2018 2% 5% 8%+ Defined contribution 1% employee contribution 3% employee contribution 5% employee contribution 2% employer contribution Defined contribution 1% employer contribution 3% employer contribution Staging period October 2012 October 2017 October 2018

  11. Cost / Budget elements • Cost of designing/planning your Employers scheme • Cost of implementing:- • Pension scheme(s) / contributions • Communication to / Educating staff • Cost of Running the scheme • Pension contributions • Compliance & Administration

  12. 8 Steps to Auto-enrolment:

  13. Employer types emerging • Sophisticated Employers • Existing scheme / benefits • Business complexity • Staff Hierarchy in place • 6m + to go before staging date • Review existing situation • Willing to consider ‘the best’ • Undertake full review • More advice • Longer implementation • “Take The Pain Away “ Employers • No scheme in place • No budget in place • Left things late • staging date looming – planning? • Low business complexity • ‘Vanilla’ solution • Less advice • Shorter implementation

  14. Employee Benefits Strategy & Budget SIPP ? Personal Pension ? Same scheme for everyone ? Same % contribution for everyone ?

  15. Workforce assessment: “Qualifying Earnings basis” 2014/15 tax year £41,865 £36,093 £10,000 .. The trigger for Auto-enrolment £5,772

  16. Assessing your workforce • Eligible Jobholders • Aged between 22 and State Pension Age • Have ‘qualifying earnings’ in the Pay Reference Period

  17. Thresholds v Pay Reference Periods (PRP) 2014-15 †For other PRP durations, multiply the number of weeks in the PRP by the weekly amount (eg £192.00) or number of months by the monthly amount (eg £833.00) etc - or pro-rata if not an exact multiple of any of the above. N.B. The Secretary of State will review these figures each tax year.

  18. Assessing your workforce • Non-Eligible Jobholders • Can choose to ‘opt-in’ • Employers must then enrol them and make contributions

  19. Assessing your workforce • Entitled • Age 16 – 74 • Earning < £5,772 • The employer does not have to make contributions for them • Does not have to be the scheme approved for AE

  20. Can Employers Postpone ? • Postponement suspends the duty of automatic enrolment and the need to assess. • Can be from 1 day up to maximum of 3 months - and can vary by individual. • The employer must notify any postponed worker within 6 weeks. • The worker has the right to Opt In or Join during postponement. • So the pension scheme still has to be set up on the staging date !

  21. Which pension scheme provider is best ?Does it matter ?

  22. HR considerations • Recruitment conduct • Probationary Periods • Employment contracts • Offer letters • Policies / deduction of wages clauses … • Data protection (sending data to 3rd party pension providers)

  23. How & when to communicate to workers • Communications must be direct (e.g. letter, e-mail, payslip, HR web-portal). • At staging, need to communicate to all workers, even scheme members. • Need to inform of rights the first time† a worker becomes a particular category

  24. Getting it wrong …. & ….Compliance & Record Keeping

  25. tPR: Powers & Penalties Escalating penalty Workers Penalty per day 1-4 £50 5-49 £500 50-249 £2,500 250-499 £5,000 500+ £10,000 Persistent/Deliberate Offenders Fixed penalty £400 Prohibited recruitment conduct Workers Fixed penalty 1-4 £1,000 5-49 £1,500 50-249 £2,500 250+ £5,000 Third parties £200 per day escalating (up to £50,000)

  26. Record Keeping • Employers,….., must keep records about their workers and the pension scheme used to comply with the employer duties. • An employer can use electronic or paper filing systems ………………………. ……..as long as these records are legible or can be produced in a legible way. • Most records must be kept for six years; …. those that relate to opting out must be kept for four years. • The records must be produced to The Pensions Regulator, if requested. • The Pensions Regulator can conduct an inspection if they have reasonable grounds to do so (e.g. if there is a Whistleblower).

  27. Data to be kept by employers Data will need to be kept for: • Workers who become scheme members (e.g. Name, DoB, NI number†, gross qualifying earnings, contributions paid). • Plus, for Jobholders only: • Date of automatic enrolment or the original format Opt In notice; • Contributions entitled to under scheme rules. • Plus, for Entitled Workers only: • Date with effect from which the worker became an active member; • The original format Joining Notice. • All workers for whom the employer has used postponement:(Name, NI number†, date the notice was sent to the worker). • Details of the pension scheme(s)†† used: • EPSR (Employer Pension Scheme Reference); • Any evidence showing that a scheme is a Qualifying Scheme; • Pension provider / scheme name & address. † where one exists†† data also to be kept by pension scheme provider

  28. Options to manage Complianceand record keeping • Manual administration • Payroll software • Accounting software • HR software • Bespoke Middleware Functionality ? Time ? Costs ?

  29. How does an Employer choose ? • Complexity of the business • Existing software (Payroll / HR etc) • Pension scheme provider solution exist ? • Bespoke Middleware ? • Functionality comparison of each option • Cost comparison of each option The employer duties must be delivered

  30. Middleware: Links with any/all external systems

  31. In Summary

  32. No provision Existing Provision • Take advice • Are you compliant ? • Eligibility ? • Contribution structure ? • Project Plan • Budget • Engage your staff • Communication • Processing & Record keeping • Payroll • Take advice • Plan ahead • Budget • Engage your staff • Communication • Processing & Record keeping • Payroll

  33. About Q&A People Matter Floor 34 Euston Tower 286 Euston Road London NW1 3DP Q&A People Matter has a comprehensive range of global services that provides a “one stop shop” solution for a company’s personnel and management, legal and employee benefit needs. We pride ourselves on being forward thinking and creative. Together with our Alliance Partners we have a wealth of knowledge and experience in the HR and Employee Benefits arena. Longdene HouseHedgehog LaneHaslemere, SurreyGU27 2PH Mollfort HouseKintyre Suite,Water Street, Ramsey,Isle of Man, IM8 1JP Dubai World CentreDubai UAE T: +44 (0) 845 4704818F: +44 (0) 845 4705018 info@qnapm.com www.qnapm.com

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