Employment issues: The new pensions auto enrolment process Wednesday March 18th 2015 South and Vale Community Sector Forum, Wantage David Bates Oxfordshire Community and Voluntary action

LEARNING OBJECTIVES By the end of todays’ session you will be able to: Explain the background and reasons for the introduction of Pensions Auto Enrolment Describe what you need to do to meet the new requirements and which of your employees are covered Identify key dates for meeting the requirements and future contribution increases Explore and assess the options from differing pension providers Identify the administrative and payroll  implications Produce an action plan for you organisation to meet the requirements 

Round table introductions Name Organisation Number of Employees(Full time and Part time) Any self employed contractors? Have you made a start preparing for Pensions Auto enrolment Your level of knowledge/awareness of the new regulations

IMPORTANT OCVA is not regulated to provide Financial advice. The aim of todays session is to provide information on the new regulations based on our understanding of requirements at present. We recommend you speak to your Financial adviser or to one of the National Auto enrolment providers (NEST, NOW etc) to receive advice on your particular circumstances and to put in place an appropriate pension arrangement and system to meet the new requirements.

Pensions Auto Enrolment Pension Reform legislation from October 2012 requires that All Employers will have to automatically enrol eligible employees into a workplace pension and make Employer contributions Being phased in over 6 years. Larger Employers first

Why? A National Pensions Crisis Recent research* revealed that UK has lowest levels of retirement savings On average, Briton’s savings only cover 37% of their retirement income Average Briton has 19 years in retirement but savings last only 7 years Other income needed for retirement – from the State or employment HSBC “The Future of Retirement: A New Reality”

Historic and projected life expectancy at age 65 years (UK) 1981 Men 14 (79) yrs Women 18 (83) yrs 2010 Men 21 (86) yrs Women 23.7 (88.7) yrs 2051 Men 25.9 (90.9) yrs Women 28.3 (93.3)yrs Source: Office for National Statistics, Pension Trends Chapter 2 data tables, 16 February 2012

NB: State Pension operates on a pay as you go basis

Increase in the number of people over 80 In next 22 years the number of people aged 80 and above is expected to double

State Pensions are unaffordable State Pension age has increased and been equalised Between April 2010 and 2018 State Pension Age will rise to 65 for women and then to 66,67 and 68 for both Men and Women New State single rate flat pension of around £140 per week to be introduced from April 2016

RECAP- Why is the Government introducing Auto enrolment Insufficient savings for retirement by individuals and take up of personal and occupational pension schemes. Dramatically increasing life expectancy State Pension increasingly unable to meet retirement income expectations

What is Pensions auto enrolment? Automatic enrolment means that, rather than having to actively choose to join a pension scheme, staff are put into one by their employer as a matter of course. If they don’t want to be in the pension scheme, they must actively choose to opt out.

Who needs to be enrolled into a workplace pension? You must automatically enrol all workers who are: aged 22 to state pension age working in the UK earning over £10,000 a year (for 2014/15) Some workers who don’t meet criteria above are able to opt in to the pension scheme you’re using for automatic enrolment. You must put them in if they ask.

Who qualifies as a worker A “worker” is defined as someone who works under a contract of employment (an employee) or Has a contract to perform work or services personally and are not undertaking the work as part of their own business. Staff are considered workers even when they are not carrying out work eg zero-hours contracts

Self Employed Be aware an individual considered as self employed could still be assessed as a worker for auto enrolment if: The employer expects them to perform the work themselves and they cannot use a substitute. They are not undertaking the work as part of their own business.

How much must you pay (as a percentage of qualifying earnings) Date Employer minimum contribution Total minimum contribution Employer's staging date to 30 September 2017 1% 2% 1 October 2017 to 30 September 2018 5% 1 October 2018 onwards 3% 8% Minimum 3 % to come from Employer by 1/10/2018

What are qualifying earnings Earnings between £5,772 and £41,685 for the 2014/15 tax year Qualifying earnings include a workers salary, wages, overtime, bonuses and commission as and maternity pay Pay reference period 2014 - 2015 Annual 1 week Fortnight 4 weeks 1 month 1 quarter Bi-annual Lower level of qualifying earnings £5,772 £111 £222 £444 £481 £1,443 £2,886 Earnings trigger for automatic enrolment £10,000 £192 £384 £768 £833 £2,499 £4,998 Upper level of qualifying earnings £41,865 £805 £1,611 £3,221 £3,489 £10,467 £20,933

Employers have a right to decide which definition of salary they use to calculate pension contributions providing it meets minimum requirements

What else do you need to do? Write to each member of staff individually to tell them how they’ve personally been affected by automatic enrolment. The information you’ll need to tell them is different depending on their rights and the duties you have for them. You must also provide certain information to the regulator about how you’ve complied with your duties.

Information on what you need to do and when? http://www.thepensionsregulator.gov.uk/automatic-enrolment.aspx

By when? You need to find your staging date

Start planning early You’ll need to make some changes to allow for automatic enrolment, such as: Setting up a pension scheme or modifying an existing one Making any necessary changes to payroll so it can handle the new requirements Putting systems in place to monitor the ages and earnings of your staff (your payroll may be able to do this) Writing to your staff. Pensions regulator automatic enrolment planner will help you find out what you’ll need to do, when you’ll need to do it and roughly how long each part will take.

Budget What level of Pensionable earnings to use? Minimum Banded earnings or Basic Salary or others? What contribution rate can you afford? The minimum or other? Will you postpone for up to 3 months and phase in contributions to manage the cost implications?

Your existing Pension Scheme if you have one Need to speak to your Pension provider or IFA and find out whether it meets the criteria for auto enrolment for existing members? Will they admit new members under the auto enrolment provisions? The scheme Does not have to require employers consent to join or for the worker to provide any information or express a choice Has to allow workers to join from their first day of employment Needs to be tax registered in the UK Have an appropriate default fund

Choosing a new Pension Scheme Employers need to consider the following: Is it a good quality scheme that is well run Does it offer value for money Is the default fund appropriate Will you receive support with your communications Will it operate effectively with your payroll process Refer to Pension regulator guide “Selecting a good quality pension scheme for automatic enrolment”

Multi Employer Schemes that help you fulfil your automatic enrolment requirements NEST http://www.nestpensions.org.uk NOW Pensions http://www.nowpensions.com/ The Peoples Pension http://thepeoplespension.co.uk/

Payroll Implications Essential to get it right Need to talk with Pension Provider and Payroll Provider to ensure you are providing the information to them in the form they need. Membership needs to be automatic Employees have the right to opt out in their one month joining window and have contributions Returned.

A note of caution! There have been various changes since the regulations were introduced. Ensure you are reading the latest guidance. The Pensions Regulator website is a good source Obtain good quality independent financial advice and/or speak to NEST or NOW or Peoples Pension You aren’t able to give financial advice unless you are registered/qualified

Registration Employers must register with the Pensions regulator 4 months after their staging date Registration is completed online Good practice to begin registration as soon as can to comply on time

Ongoing duties Keeping records Paying across pension contributions on time Processing opt outs and opt ins Assessing new starts/when they’re eligible Your Provider may be able to help with some of these and provide ongoing advice

Penalties for non compliance Fixed Penalty £400 Escalating penalty of £50- £10,000 per day dependent upon organisation size Failure to pay contributions due – up to £5,000 for individuals and £50,000 for employers

Issues to think about and check If you have a Pension scheme is it a qualifying one? Think through the cost implications for your organisation Is your payroll software adequate to cope with auto enrolment PREPARE NOW..minimum 12 months before your staging date Which employees will be covered? (some staff may be covered even if they are self employed or on zero hours contracts)

Issues to think about and check(cont) Check you staging date. Do you need to postpone(max 3 months) Do you need to set up a pension scheme? NEST, Peoples Pension or NOW may be an option. Is any proposed new scheme well run, value for money, default scheme and will they help with communications How will you consult with & communicate about to employees Penalties for non compliance

LEARNING OBJECTIVES By the end of this session participants will be able to:   Explain the background and reasons for the introduction of Pensions Auto Enrolment Describe what you need to do to meet the new requirements and which of your employees are covered Identify key dates for meeting the requirements and future contribution increases Explore and assess the options from differing pension providers Identify the administrative and payroll  implications Produce an action plan for you organisation to meet the requirements 

Prepare an action plan for your organisation. What should it contain Prepare an action plan for your organisation. What should it contain? From todays presentation What issues do you need to be thinking about?

Any questions