1. An introduction to Automatic Enrolment FINANCIAL PLANNING December 2015

2. CONTENTS SLIDES 3-6 WHERE ARE WE NOW SLIDES 7-14 THE EMPLOYER AND WORKERS SLIDES 15-22 EMPLOYER DUTIES FOR WORKERS SLIDES 23-31 COMPLICATIONS 2

3. An introduction to Automatic Enrolment Where are we now 3

4. People in the UK are not saving enough for retirement The Government wants to make it easier for everyone to save for their retirement Since 2012, eligible individuals have to be enrolled into a qualifying pension and an employer has to make contributions into it Enrolment duties become effective from an employers’ staging date based on PAYE data as at 1 April 2012 New employers setting up between 1 April 2012 and 30 September 2017 have staging dates based on when the employer first pays PAYE in respect of any worker

5. Where we are now Scottish Widows Pensions Index % Preparing adequately for retirement 12% benchmark Underprovided: Self-employed Small employers Many women Divorcees Younger people Biggest reason for not saving is lack of money, but lack of understanding and confidence also important

6. Sticks Where we are now/where we may get to Carrots Tax relief Tax-beneficial investment Tax-free cash Automatic enrolment Compulsion Designation

7. An introduction to Automatic Enrolment The employer and workers 7

8. Employer Worker Entitled worker Jobholder Eligible jobholder Non- eligible jobholder N.B. These terms have specific meaning

9. The employer and workers What is a worker? An employee or Someone who has a contract to perform work or services personally. Not undertaking work as part of their own business.

10. The employer and workers What is a jobholder? A worker who: –is aged between 16 and 74 –is working or ordinarily works in UK under their contract –has qualifying earnings Qualifying earnings currently means the NI lower and upper earnings limit i.e. From £5,824 to £42,385 a year for 2015/16 (or weekly, monthly etc equivalents)

11. The employer and workers What is an eligible jobholder? A jobholder who: –is aged between 22 and SPA –has qualifying earnings above the trigger for automatic enrolment Qualifying earnings trigger for automatic enrolment is £10,000 a year for 2015/16 (or weekly, monthly etc equivalents)

12. The employer and workers What is a non-eligible jobholder? A jobholder who: –is aged between 16 and 21 or SPA and 74 –has qualifying earnings above the trigger for automatic enrolment or –is aged between 16 and 74 –has qualifying earnings below the trigger for automatic enrolment Qualifying earnings trigger for automatic enrolment is £10,000 a year for 2015/16 (or weekly, monthly etc equivalents)

13. The employer and workers What is an entitled worker? A worker who: –is aged between 16 and 74 –is working or ordinarily works in UK under their contract –does not have qualifying earnings Qualifying earnings start at £5,824 a year for 2015/16 (or weekly, monthly etc equivalents)

14. The employer and workers An eligible jobholder is ‘eligible’ for automatic enrolment but allowed to opt-out. A non-eligible jobholder is ‘non-eligible’ for automatic enrolment but allowed to opt-in. An entitled worker is ‘entitled’ to join the scheme.

15. An introduction to Automatic Enrolment Employer duties 15

16. Employer duties for workers Eligible jobholder –Auto-enrol –Collect member contributions and arrange payment into scheme –Pay employer contributions –Provide information –Action opt-out, if requested –Re-enrol eligible jobholders no longer in a ‘qualifying’ pension every three years

17. Employer duties for workers Non-eligible jobholder –Provide information –Action opt-in, if requested –Collect member contributions and arrange payment into scheme –Pay employer contributions

18. Employer duties for workers – Minimum contributions for jobholders based on qualifying earnings Contributions paid by employer and possibly employee Period Minimum Employer Minimum Total Staging Date to 5.4.181%2% 6.4.18 to 5.4.192%5% 6.4.19 Onwards3%8%

19. Employer duties for workers Example 26 year old employee earns £20,000 a year Minimum employer contribution now (£20,000-£5,824) x 1% = £141.76 based on annual earnings Minimum total contribution now (£20,000-£5,824) x 2% = £283.52 Therefore employee could be required to pay the additional £141.76 or the employer could offer to pay some portion of it

20. Employer duties for workers Entitled worker –Provide information –Action joining scheme, if requested –Collect any contributions from joiners and arrange payment into scheme –Employer contributions optional

21. Employer duties for workers Keep track of employees’ ages and earnings –Take action when employees move from one category to another.

22. Exceptions to employer duties Condition for exception to applyOptional dutyNo duty Notice to terminate employmentAuto-enrol / re-enrol Pensions with tax protected statusAuto enrol/re-enrol Ceased active membership QWPS > 12 months before AE dateAuto enrol Ceased active membership QWPS < 12 months before AE dateAuto enrol/re-enrol Winding up lump sum paid > 12 months before AE date, ceased employment & re-employed by same employer Auto enrol Winding up lump sum paid < 12 months before AE date, ceased employment & re-employed by same employer Auto enrol/re-enrol

23. An introduction to Automatic Enrolment Complications 23

24. Complications One person companies Agency workers Personal service worker Secondees Offshore worker Seafarers Armed Forces

25. Complications One person companies A sole controlling director of a company without any other employees will not be classed as a ‘worker’. Irrespective of whether he/she has a contract of employment or not. Not caught by automatic enrolment regulations. If another worker is taken on and they both have a contract of employment then they would become ‘workers’ under these rules. Automatic enrolment duties will apply.

26. Complications Agency workers First assess under normal rules of ‘worker’ status. If this test fails, assess who is contracted to pay the wages. They are deemed to be the employer. If this test fails, assess who actually pays the wages. They are deemed to be the employer.

27. Complications Personal service worker ‘Contract of service’ or ‘Contract for services’. ‘Contract of service’ is when an individual has a contract to perform services personally. ‘Contract for services’ is when a self-employed person has a contract to perform services. Employer needs to establish using various tests. No single conclusive test.

28. Complications Personal service worker Some useful indicators of ‘Contract of service’ Employer reliant on individual’s expertise and expects him to perform services personally. Element of subordination between employer and individual. Contract provides for employee benefits such as holiday pay, sick pay, notice period, etc. Employer provides tools to enable individual to work. Not exhaustive. Other tests can also be used.

29. Complications Secondees An individual on secondment will normally remain a ‘worker’ for the employer they have been seconded from. Still need to refer to the wording of the contractual arrangement.

30. Complications Offshore worker Any offshore worker will be assessed using the standard rules for ‘worker’. i.e. employee with contract of service. Seafarers All will be treated as ‘workers’ but seafarers often work on ships not exclusively operating in UK territorial waters.

31. Complications Armed forces Any serving member is not classed as a ‘worker’. Any cadet member is not classed as a ‘worker’ when carrying out cadet duties.

32. Every care has been taken to ensure that this information is correct and in accordance with our understanding of the law and HMRC practice, which may change. However, independent confirmation should be obtained before acting or refraining from acting in reliance upon the information given. Scottish Widows Limited. Registered in England and Wales No. 3196171. Registered Office in the United Kingdom at 25 Gresham Street, London EC2V 7HN. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Financial Services Register number 181655. FP0377