11 October 2016
Rich Cooper
Jamieson Christie Chartered Financial Planners
Rich Cooper
Workplace Pensions
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Summary of the current position on Auto-Enrolment
Overview of Employer Requirements
Update from “The Pension Regulator”
Employer Requirements –The Real Picture
Salary Exchange – A Note of Caution
Jamieson Christie - How We Can Help
Auto-Enrolment Update
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1.2 million companies climbing the mountain
Do you find a guide or go it alone?
10 different routes
which one do you choose?
Employer Responsibilities
What are their duties?
Employers must:
• Have a pension scheme
• Auto enrol some employees and
• Enrol other employees...
• ...into an ‘Automatic Enrolment Scheme’
• Pay contributions
Employer Responsibilities
• http://www.thepensionsregulator.gov.uk/employers.aspx
Sole Director Companies or No Employees
?
Admin duties, do’s and don’ts
Employers Must
• Select and provide a suitable
scheme for their workers
• Auto enrol and re-enrol/deduct
payments
• Complete Scheme Compliance
• Provide information to eligible
and non-eligible jobholders
• Provide information to
scheme/provider
• Process opt outs/make refunds
• Keep records - 6 years (opt-in
and opt-out notices 4 years)
Employers Must Not
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Discourage membership
Give jobholders the opt-out form
Encourage opt-outs
Use ‘Prohibited recruitment
conduct’
• Give advice
Eligibility
Qualifying Earnings
AGE
< £5,824
£5,824 - £10,000
> £10,000
16-21
Entitled Worker
Non-Eligible
Jobholder
Non-Eligible
Jobholder
22-SPA
Entitled Worker
Non-Eligible
Jobholder
Eligible
Jobholder
SPA-75
Entitled Worker
Non-Eligible
Jobholder
Non-Eligible
Jobholder
Employer Costs
Based on Qualifying Band Earnings
Steady State
To Use or Not to Use Qualifying Earnings
• Qualifying Earnings have to be used for your initial
assessment.
• They do not need to be used for calculating contributions
• You can certify using 3 separate tiers
Certification
Teir
Rule
Initial Min Min Level Min Level
Level
From Apr From Apr
18
19
1
Pensionable pay =
Basic pay
2
Pensionable pay =
Basic pay ( 85% of
total pay)
Emp 2%
Eee 1%
Emp 1%
Eee 1%
Emp 3%
Eee 3%
Emp 2%
Eee 3%
Emp 4%
Eee 5%
Emp 3%
Eee 5%
3
Pensionable pay =
Total pay
Emp 1%
Eee 1%
Emp 2%
Eee 3%
Emp 3%
Eee 4%
The Pension Regulator Update
The Pension Regulator Update
Each quarter The Pension Regulator gives an update of the
compliance position and fines issued. This has seen a massive
increase over the last 12 months*
Compliance Area
Compliance Notices
Number in last
Quarter
Total to date
3,392
11,099
Unpaid Contribution Notice
177
582
Fixed Penalty Notice
861
3,045
Escalating Penalty Notice
38
165
*TPR Compliance Update July 2016.
The Pension Regulator Update
• The Pensions Regulator (TPR) has warned small employers
over auto-enrolment staging dates.
• TPR said around 20% of small employers and almost half of
micro employers did not know the exact date they needed to
comply with auto-enrolment laws.
• It has warned employers to start preparing for autoenrolment 12 months ahead of their staging date, as failure
to prepare in good time could lead to a financial penalty.
• Don’t ignore any compliance or penalty notices
Employer Requirements
12- 9 Months Before
Planning Stage
9-0 Months Before.
Implementation Stage
Staging Date
Staging and ongoing
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Know Your Staging Date
Analyse Workforce
Understand Your Costs
Agree The Scheme Design
• Choose a Pension Scheme
• Postponement?
• Prepare Communications
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Automatically Enrol Staff
Communicate
Declaration of Compliance
Maintain Records
Fulfil Ongoing Responsibilities
Why To Start Planning Early
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Capacity Issues
Know your staging date and work backwards
Know the size of the problem
Build in the admin/resource/payroll requirements
Manage your increased employee costs / salary
exchange/reduced pay increases
Providers being selective
Providers not offering terms to some employers
Avoid the possible fines from The Pensions Regulator
Get an adviser on board (limited number)
The Real Picture
Planning ahead is key.
Very large volumes staging
from January 2016
Real
CommonThe
myths
- I Picture - Myths V Reality
Myth
1. All employees need to be enrolled
2. Postponement delays the staging
date and there is no need to do
anything until then.
3. Employers can work out their own
staging date.
4. Pensionable pay is used to
determine which category a
worker is (e.g. EJH).
5. I can bring my staging date
forward to any date.
Reality
1. Only Eligible Jobholders need to
be enrolled
2. Postponement does not change
the staging date (and other duties
still apply in this period).
3. Employers are unlikely to know
their PAYE size on 1 April12, so
should use staging date tool.
4. Qualifying Earnings must be used
for assessment, not pensionable
earnings.
5. There are fixed dates to which you
can bring forward your staging
date and specific rules need to be
followed.
The Real Picture - Myths V Reality
“It
will be best just to use my existing group
pension scheme for all my employees”
The Real Picture – Employer Cost Example
• Employer 20 employees – 8 are members of existing pension
scheme 3% Employer 3% Employee of basic salary - Payroll is
£400,000
• Current Cost to employer = £4,800 p.a.
• Assume uses current scheme and 90% take up, new cost
= £10,800 p.a.
• Set up a separate Auto Enrolment scheme using Qualifying
Earnings and Minimum Contribution 90% take up
New Cost = £6,217 p.a.
• Saving over 2 years until next contribution increase =
£9,166
• Using Postponement saved a further £354
• Further savings being made using salary exchange
Salary Exchange
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Employee earning £20,000 per annum
2% employer & 2% gross employee contribution
Employee Exchanges Salary to maintain same take home pay
50% of any employer NI Savings retained by employer
A Word of Caution
• Minimum Wage
• No Contractual
• Government Position
The
Real
Common
myths
- I Picture - Myths V Reality II
Myth
Reality
7. It will be easy to find a pension
provider
7.
Pension Providers are being very
selective – For example…
8. None of my employees will join
8.
Take up rate is in excess of 90%
9. My payroll system will do everything 9.
for me.
All Providers need data in a specific
format – manual intervention will
be required.
10.Once I have set the scheme up there 10.There are a large number of ongoing
is nothing left for me to do.
requirements for employers.
Meeting provider data requirements a challenge
Meeting provider data requirements a challenge
• Providers require employers to upload employee data in a specific proforma
• Requires updating / transferring payroll data into this pro-forma prior
to staging
• Although not difficult, this process was often described as extremely
time consuming – often has to be done manually due to:
– Fiddly formats – extreme precision required around capitalisation
and commas or the system will not accept the data (e.g. ‘Mr.’ not ‘Mr’)
– Entire pro-forma cannot be uploaded until everything is rectified –
employer’s responsibility to resolve these issues manually
– Unexpected glitches
• e.g. one employer employed a husband and wife who shared an email
address; the system would not accept a duplicate email address
– Non ‘user-friendly’ forms to populate
• e.g. information not flowing in an order that mirrors the
payroll, prohibiting a straight data transfer
The Real Picture –Ongoing Responsibilities
Every Payroll Period
• Calculate contributions, create a contribution schedule, advise
provider and make payment.
• Continually Assess Workforce – to check eligibility.
• Deal with New Joiners, Leavers and Opt-Outs and Opt-Ins.
Ongoing
• Keep Records for 4 to 6 years for different information.
• Re-enrolment every 3 years.
• Annual Audit.
Want to know what auto-enrolment really means?
Let Jamieson
Christie help
you through
the pensions
maze.
Our
Proposition
Our Basic Proposition
• Menu based proposition with 3 distinct stages based on the
size of the employer
• Getting Started Report
• Implementation
• Ongoing Annual Support
Our Basic Proposition
• Menu based proposition with 3 distinct stages based on the size
of the employer
• Getting Started Report – from £625
• Implementation – from £600
• Ongoing Annual Support – from £650
Versus
• The Cost of Getting it Wrong – Daily Fines
In Summary
• Know Your Staging date
• You will need to auto-enrol eligible employees
• You will need to give non-eligible employees the option of
joining.
• It will cost you a minimum of 3% of qualifying earnings from
Apr 2019
• Many providers are not prepared to look at schemes with less
than 6 months to their staging date
• There will be a capacity issue (providers/advisors)
• The opt out rate is less than 10% (what impact will that have
on costs)
• You cannot encourage employees to opt out/not join
In Summary contd.
• The fines for getting it wrong are high
• By starting early you remain in control and manage your costs
• Ensure your contracts of employment are up to date and
correct
Auto-Enrolment Summary
Of course we can
take your scheme –
we have plenty of
room !
….could I just ask
Disclaimer
This presentation represents Jamieson Christie Wealth Management Limited’s interpretation of current and
proposed legislation and HM Revenue & Customs practice as at the date of publication - these may change
in future.
Past performance is not a guide to the future. Prices can fall as well as rise meaning you may not get back
the value of your original investment. Investment returns may fluctuate and are not guaranteed.
The information shown is based upon our understanding of taxation rules and legislation at the time of
presentation and is subject to change. Any views expressed by the presenters are their own and should not
be taken out of context or relied upon as advice. The purpose of the presentation is to provide information
and stimulate debate, it is not meant to be considered as financial advice and no actions should be taken
without consultation with a suitably qualified adviser.
Full details of the advice services provide by Jamieson Christie are available upon request.
Jamieson Christie Wealth Management Limited is a directly authorised company, authorised and regulated
by the Financial Conduct Authority, registration number 422773.
October 2016