WEBCAST

AUTO-ENROLMENT: A GUIDE FOR SMEs 4 NOVEMBER 2015

Craig Haines & Giles Craddock Elect by Mercer Marsh Benefits Bristol

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What we’ll cover today

• Introduction • Who we are • Objectives for today • Auto-enrolment - getting it right • Your questions

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Who we are Elect Employee Benefits

• The small business benefits specialist • Benefits designed with smaller size groups in mind • Enhanced benefits normally only available to larger groups • We are part of Mercer Marsh Benefits • A global consulting leader in talent, health, retirement, and investments • 20,000+ employees • Operations in over 140 countries

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What we want you to take away

An understanding of what auto-enrolment is and how your business will be affected An awareness of the key things to consider when thinking about auto-enrolling Ideas about how to start planning for auto-enrolment to make sure you select the right solution.

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What is auto-enrolment? An overview

• The government introduced a law starting in October 2012 to make it easier for people to save for their retirement. • It requires all employers to enrol their staff into a workplace pension scheme. • Both the employer and the employee will have to contribute a minimum financial amount. • The Pensions Regulator has released detailed guidance on employers’ duties.

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When will it apply to me?

The staging date is the date on which employers need to enrol ‘eligible jobholders’ and start making contributions to a ‘qualifying scheme’. This is based on employer size, as measured by the number of employees on the PAYE payroll. Employer size (by PAYE scheme size) or other description

Automatic enrolment duty date From

To

1 October 2012

1 February 2014

50 to 249 Employees

1 April 2014

1 April 2015

30 to 49 Employees

1 August 2015

1 October 2015

Less than 30 Employees (dependent on PAYE reference number)

1 June 2015

1 April 2017

Employers without PAYE schemes

1 April 2017

---

To 250 or more Employees

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Postponement

• What is it? – Postponement allows you to defer your first assessment of some or all of your employees for a period of up to 3 months. • The story so far – From July 2012 to March 2015, 51.7% of employers elected to postpone the process of assessing their workforce for auto-enrolment purposes*. Within the last year. • Things to be aware of - Employees can still opt in. - You need to issue a postponement letter to everyone. - Really need a scheme in place

*The Pensions Regulator - Automatic enrolment – Commentary and analysis: April 2014 – March 2015

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Who should I auto-enrol?

Entitled workers:

Can ask to opt in. Company not required to contribute.

Non-eligible jobholder:

Can ask to opt-in and Company must pay contributions.

Eligible jobholder:

Company must auto-enrol and then pay contributions. Age (inclusive)

Earnings *

16-21

Under lower earnings threshold (£5,824)

SPA**– 74

Entitled worker

Between £5,824 - £10,000 Over earnings trigger for automatic enrolment (£10,000)

22 – SPA **

Non-eligible jobholder Non-eligible jobholder

Eligible jobholder

Non-eligible jobholder

* All earnings figures are in 2014/15 terms ** State Pension Age

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How much do I have to contribute? Contributions and certification

Minimum contributions

Requirements for self certifying

Salary definition

Qualifying earnings (£5,824 to £42,385 in 2015/16)

Basic salary

Contribution

Total Contribution 8% (Min. Employer 3%)

Total 9% (Min. Employer 4%)

Experience so far**

20%

25%

*Pensionable

Pensionable Earnings *

Total earnings

Total 8% (Min. Employer 3%)

Total 7% (Min. Employer 3%)

40%

15%

Earnings under Set 2 must be greater than Basic Salary and at least 85% of total earnings across the scheme

**Experience of Aegon, a pension provider

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Phasing

Minimum self-certification requirements Minimum contributions

Set 1

Set 2

Set 3

Salary definition

Qualifying Earnings* (£5,824 p.a. and £42,385 in 2015/16)

Basic salary

Pensionable salary**

Total earnings

Contributions from Staging Date

Total 2% Employer min. 1%

Total 3% Employer min. 2%

Total 2% Employer min. 1%

Total 2% Employer min. 1%

Contributions from 1 October 2017

Total 5% Employer min. 2%

Total 6% Employer min. 3%

Total 5% Employer min. 2%

Total 5% Employer min. 2%

Contributions from 1 October 2018

Total 8% Employer min. 3%

Total 9% Employer min. 4%

Total 8% Employer min. 3%

Total 7% Employer min. 3%

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Statutory communication

• What you need to send - Write to your staff individually after your staging date, telling them about the pension plan you’ve chosen and how auto-enrolment applies to them. - If you are postponing confirm this to staff in a letter. • Who you need to send it to - Employees who are not currently in a qualifying pension scheme pension scheme. • When you need to send it - When you are enrolling staff. - When you are issuing a postponement notice.

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Engaging employees

Offline/Paper Bespoke literature including “your” logo Posters Desk drops/Flyers QR codes will be included

Online Webinars Surveys

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Face-to-face Member presentations (webcasts can also be recorded)

Electronic e-community Emails

Statutory Communication Seasonal communications Helps staff think about what they are getting

Postponement letters Enrolment letters Opt out letters

Opting out

• What is it? - Employees have the right to opt out of the pension scheme. • The story so far - The DWP was initially expecting the opt-out rate to be 30% but research shows opt outs were running at 12%. • Things to be aware of - Inducement and prohibitive recruitment.

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Declaration of compliance

• What is it - Demonstrates that you have complied with the legislation. • The story so far - Only 67% of ‘small’ employers(5-49 employees) an 59% of ‘micro’ employers (1-4 employees) were aware they need to complete a declaration*. • Where you need to do it - Employers have 5 months from their staging date to complete their declaration.

*The Pensions Regulator - Automatic enrolment – Commentary and analysis: April 2014 – March 2015

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Ongoing responsibilities Duties after your staging date

Assess staff

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Enrol and re-enrol employees

Manage opt outs

Keep and maintain records

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Staying on target The common pitfalls

• Not giving enough time to it. • Not knowing your people • Using an adviser to help with auto-enrolment decisions. • Lack of or poor quality employee data. • Not understanding postponement.

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What if I don’t do it?

In the year ending March 2015 the TPR issued:

• 1682 compliance notices • 22 unpaid contribution notices • 30 statutory demands • 6 statutory inspection notices • 424 fixed penalty notices

“As the number of employers staging rises significantly, we expect to see an increase in how often we need to use our statutory powers. This expectation is based on our research among small and micro employers, which shows that these employers are more likely to leave automatic enrolment preparations until closer to their staging date, or indeed until after their staging date, and therefore risk being noncompliant with their duties.”

• 5 escalating penalty notices The Pensions Regulator

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Getting started

• What you need to do to get started? • Do you need help doing it? • How will you assess your employees? • Can you use your current scheme? • What's it going to cost?

“68% of employers expect to use an advisor to provide practical assistance with automatic enrolment.*”

• How will it affect your market position? The Pensions Regulator

*The Pensions Regulator - Automatic enrolment – Commentary and analysis: April 2014 – March 2015

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How can we help?

• Review your existing scheme to make sure its fit for purpose. • Identify what you need to do to make sure you get auto-enrolment right. • Help you engage with your staff to make sure you are getting a return on your investment. • Call us: 0800 0232 785 • Email: [email protected] • Visit: www.electemployeebenefits.co.uk

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Questions

Giles Craddock

Craig Haines

QUESTIONS

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