Little and Georgiou LLP

Government spending on state pensions £75 bn 18.3 yrs Male life expectancy at age 65 12% DB schemes open to new members c. 25k Average size of DC pot used to purchase annuity 9% Average contributions to DC c. 2 m Pensioners in poverty 11 m People under-saving for their retirement 2004 Auto-enrolment recommended

Why - To reduce dependency upon the state in retirement When - Various “staging dates” from October 2012, depending upon number of employees (and PAYE reference number if less than 30 employees) How - Via N.E.S.T. or a Qualifying Workplace Pension Scheme Little and Georgiou LLP

Auto enrolment is not just about pensions, it is about processes, data, technology and payroll AE more complicated than most employers think Employers are under-prepared and leave it too late Takes longer than anticipated Don’t assume existing pension scheme can be an auto enrolment vehicle Little and Georgiou LLP

Not now....! Come back later

Marketing the scheme Assessment of workforce Scheme Design Postponement Statutory communications Enrol employees Manage opt outs Employer duties Complete scheme certification Record keeping Register with the Pension Regulator Continual assessment Tri annual review Re auto enrolment And so on………………. Little and Georgiou LLP

At staging for all existing workers On the 16 th or 22 nd birthday First day of employment for new employee First day of pay reference period for any other worker assessed after staging If postponement has been used – last day of postponement period Assessed based on age and “qualifying earnings” Little and Georgiou LLP

WorkerAgeEarnings Eligible Jobholder22 – state pension ageOver £10000 (2014/15) Non Eligible Jobholder16 – 21 and state pension age to 74 Over £10000 (2014/15) Non Eligible Jobholder £ £10000 Entitled Worker Less than £5772

Little and Georgiou LLP EmployeeCategoryAction Required Employee already in qualifying scheme with employer Existing MemberNo joining action required All other employees Earning at least £833 per month Aged 22 – state pension age Eligible JobholderAutomatically Enrol into a qualifying workplace scheme Earning between £481 and £833pm Aged between 16 and 74 Non eligible JobholderCan Opt in and receive employers contributions Earning at least £833 pm Aged or between state pension age and 74 Non eligible JobholderCan Opt in and receive employers contributions Earning less than £481pm Aged between 16 and state pension age Entitled Worker“Entitled” to join a scheme Employer does not have to contribute

Knowing who to auto enrol EmployeeCategoryAction Required Employee already in qualifying scheme with employer Existing MemberNo joining action required All other employees Earning at least £833 per month Aged 22 – state pension age Eligible JobholderAutomatically Enrol into a qualifying workplace scheme Earning between £481 and £833pm Aged between 16 and 74 Non eligible JobholderCan Opt in and receive employers contributions Earning at least £787 pm Aged or between state pension age and 74 Non eligible JobholderCan Opt in and receive employers contributions Earning less than £481pm Aged between 16 and state pension age Entitled Worker“Entitled” to join a scheme Employer does not have to contribute

Little and Georgiou Pensionable Pay Definition Minimum Employer % Minimum Total % Tier 1Basic Pay49 Tier 2Basic >85% of total earnings 38 Tier 3Total earnings37 Certification Employer must choose suitable scheme for their employees Scheme contributions can be based on 8% of ‘qualifying earnings’ - £5,668 - £41,450 (2013/14). However most employers prefer to certify that schemes meet one of the tiers of ‘alternative requirements’ for qualifying.

Little and Georgiou 7% of all earnings8% of pensionable salary > 85% of total payroll pensionable 9% pensionable salary 8% of qualifying earnings TotalEmployerTotalEmployerTotalEmployerTotalEmployer Staging Date until Sept %1%2%1%3%2% 1% Oct 2017 until Sept %2%5%2%6%3%5%2% October 2018 onwards 7%3%8%3%9%4%8%3%

All eligible employees must be auto enrolled. This must be immediately upon joining the company or any time up to 3 months after joining in order to tie in with payroll, administration, procedures or to avoid enrolling very short term employees. An Employee can choose to opt-in during the three month period. Individuals can opt out at anytime but they will only receive a refund if they opt out during the first month. Individuals who choose to opt out must be auto re- enrolled on the 3 rd anniversary of the employer’s staging date. Employers will face fines (and potentially imprisonment) if they induce or otherwise encourage an employee to opt out. Opt out process must be handled by pension provider Little and Georgiou

Also known as “waiting period” Can be used at staging date, when an employee becomes eligible or when a new employee joins workforce It suspends the duty of assessment for up to 3 months An employee can opt in or join during this period Employer must notify employees if using postponement via statutory communications Employer must assess on last day of postponement and auto enrol eligible jobholders or if not eligible monitor each future pay reference period Little and Georgiou

Must be direct – letter, , payslip At staging, need to communicate with all workers, even existing scheme members Non eligible jobholders and entitled workers must be provided with information about right to opt in or join Eligible jobholders being automatically enrolled must be provided with Information about their enrolment What it means for them, including contributions and Their right to opt out Workers must be informed if postponement is being used Little and Georgiou

Employer duties are not optional. The penalties for not complying are severe. Employer must ‘market’ the scheme to all employees. Employer must provide accurate and up to date payroll data to the Qualifying Workplace Pension Scheme. Employer must provide annual statements. Employer must retain specific records relating to employees’ pension benefits for a minimum of 6 years. Little and Georgiou

Fixed penalty notices - £400 Escalating penalty notices from £50 - £10,000 per day Little and Georgiou Number of EmployeesPrescribed Daily Rate 1 – 4£50 5 – 49£ – 249£ – 499£ £10000

Little and Georgiou Action / CommunicationDeadline Letter to existing qualifying pension scheme members at Staging 2 months after Staging Letter to workers who are not already in a qualifying pension scheme at Staging 6 weeks after Staging Joining Window, enrolment notifications & Transitional Period notices 6 weeks from the Assessment date (e.g. before midnight of Mon 12 th May, if assessed Tue 1 st April). Opt Out Window1 month - from the latest of when: the enrolment notification is issued; and active membership is achieved. Postponement notices6 weeks from the day after the Assessment Date (e.g. before midnight Tue 13 th May, if assessed on Tue 1 st April). Complete Registration after Staging5 months after Staging Complete Registration after Re-enrolment2 months after Re-enrolment Normal contribution payments to scheme provider 22 nd day of the month following the month of deduction (19 th day for non-electronic payments). New member contribution payments to scheme provider (for all deductions made in first 3 months of membership) 22 nd day (for electronic payments) of the first month, following a three month period starting the day active membership is effective (19 th day for non-electronic payments). Eg Enrolments 2 nd Jan to 1 st Feb = e-payment deadline is 22 nd May.

“Employers should be under no illusions: this will take time, including assessing the suitability of their existing pension arrangements or choosing a scheme and adapting their payroll, HR, pensions and IT systems” The Pensions Regulator “Pension providers turn away auto – enrolment business as capacity crunch bites” Money Marketing “An employer should ideally be thinking about auto enrolment at a minimum of at least six months ahead of their staging dates, preferably longer” Money Marketing Little and Georgiou

Employers required to register by staging date 50 or more people in PAYE scheme (lower estimate) Source: The Pensions Regulator, “Automatic enrolment: Staging profile and forecast volumes”, September – 51 in PAYE

Employers required to register by staging date Under 50 people in PAYE scheme (lower estimate) Source: The Pensions Regulator, “Automatic enrolment: Staging profile and forecast volumes”, September 2012 <50 140,000

Employers must decide which route to take to meet the requirements of Auto Enrolment 1) Use N.E.S.T. and rely upon the web and telephone helpline support or 2) Establish a Qualifying Workplace Pension Scheme through a pension provider with the initial and ongoing assistance of Little and Georgiou Little and Georgiou

“Our research shows that…….employers with as few as one hundred staff – are expecting help from NEST and other providers……the fact is we won’t be able to and neither will any other provider” Roy Porter, NEST assistant director, distribution

National Employment Savings Trust is a low-cost pension scheme set-up by the Government and delivered by Tata. N.E.S.T. must be used if a Qualifying Workplace Pension Scheme is not in place. Scheme of last resort N.E.S.T. Features; Five default Target Date Funds - based on time to retirement (not risk) Target Date Funds manage asset allocation as retirement date approaches Initial charge of 1.8% per contribution (until set-up costs are met) Annual Management Charge of 0.3% Estimated Total Expense Ratio of 0.5% (based on N.E.S.T. figures) No Transfers-In or Transfers-Out Contribution limit of £4,600 (for 2014/15 tax year) Retirement Options restricted to Annuity, Open Market Option or Triviality Little and Georgiou

N.E.S.T. Little and Georgiou AdvantagesDisadvantages “Low” Cost scheme – Initial Charge of 1.8% per contribution until the scheme “set up” costs are recovered No Face-to-Face Assistance “Low” Cost scheme – Annual Management Charge of 0.3% per annum Administered by Tata through telephone Helpline and Online systems No external administration costs (i.e. Adviser fees)Transfers-In and Transfers-Out not allowed Target Date Funds manage asset allocation as retirement date approaches (not automated) Annuity, Open Market Option and Triviality are the only Retirement options Investment choice limited (5 funds) Death Benefits potentially subject to Inheritance Tax (due to no discretion for N.E.S.T. Trustees over their payment) Annual contribution limit £4,600 (this is potentially insufficient for high earners)

A Qualifying Work Place Pension Scheme is a new arrangement administered by a Pension Scheme Provider Qualifying Workplace Pension Scheme can be used as an alternative to N.E.S.T. Qualifying Workplace Pension Scheme Features;  Many investment funds to choose from  A default fund must be nominated (a risk-based fund with Lifestyling)  Flexibility of charging structure  Can Transfer-In and Transfer-Out of Scheme Little and Georgiou

Qualifying Workplace Pension Scheme Little and Georgiou AdvantagesDisadvantages Wider fund choice usuallyPotentially more expensive than the N.E.S.T. scheme for Employees (if Adviser Fees are met from contributions) Option to consolidate existing plans through Transfers-In Potential external Administration costs (if Adviser Fees are met by the Employer) Help with initial set up and ongoing administration / enquiries Full range of Retirement Benefit Options Death Benefits not subject to IHT No annual contribution limits (other than normal pensions regulations)

Services to the Employer Advice and assistance on choosing an appropriate Qualifying Workplace Pension Scheme Advice and assistance on the setting up and operation of the Qualifying Workplace Pension Scheme including the enrolment of members Periodic reviews of the Qualifying Workplace Pension Scheme to make sure it continues to meet the requirements of the company and that it complies with pensions legislation Specific advice and guidance regarding new responsibilities under pensions reform and automatic enrolment Little and Georgiou

Services to the Employees Support in joining the Qualifying Workplace Pension Scheme including the provision of communications/guidance around investment choices Regulated advice concerning joining the Qualifying Workplace Pension Scheme At the request of an employee, advice on bringing transfers into the scheme; paying additional single premiums into the scheme; increasing regular contributions above the standard scheme basis Little and Georgiou