The Pension Reform Act

& auto-enrolment.

presented by Steve Cave

Secondsight

Areas Covered

Summary of The Pension Reform Act

A step by step process

Your Legal obligations

How to comply with your Governance obligations

Why Secondsight

The Pension Reform Act.

Auto Enrolment & NEST

From 1st October 2012 employers will need to begin auto-

enrolling employees into either the NEST pension or a

qualifying pension scheme within 90 days of commencing

employment, if they are aged between 22 and State Retirement

Age, and earning above 9,440 (2013/14). If a group personal

pension scheme is in place it will need to pass a test set by the

Pension Regulator if it is to be used as a replacement for NEST.

Whilst not all businesses will be affected immediately, all

employers will have to abide by these new regulations by

2017.

The Pension Reform Act

Workplace pensions law has changed.

Employers must automatically enrol certain staff

members into a good quality pension scheme

and make contributions towards it

Auto-Enrolment Why?

It is a government initiative with the aim to increase the retirement savings of the nation

8 million UK employees didnt have a pension at work

The hope is that many continue to save and not opt out

Commenced on the 1st October 2012, with the largest employers going first

Impact of auto-enrolment on Employers

Lots of rules and

information to understand

There will be additional

costs

Determine what your costs

will be

Additional resource

required

Wider pension review

DM1995429 v10C This presentation remains the property of The Pensions Regulator. The content of these slides should not be altered in any way.

Scenario 1

Assessment

Date on first

day of PRP

Yes

Are they an

Eligible

Jobholder?

No statutory

duty to enrol

No

Assessment

Day

30th

C

1st

R P0 C

1st

R P1 C

1st

R P2

30th 31st

Yes

Total QE

paid in PRP

> earnings

trigger ?

No

Scenario 1

Pay Reference Period runs from 1st to last day of each month;

Assessment date is the 1st May;

Total Qualifying Earnings may not be known until payroll cutoff or later. If the worker needs to be automatically enrolled:

First deduction needs to made in payday P1 on 28th May;

Opt Out window may not start until after deduction taken;

Scheme contribution based on 100% of May pensionable pay.

Monthly Pay

Reference Period (PRP)

Key: C Payroll cutoff R Payroll run P Payday

Issue letter to worker &

set up Active

Membership

Opt Out

window starts

28th 28th 28th 28th 28th 28th

Automatic Enrolment

triggered

April May June

DM1995429 v10C This presentation remains the property of The Pensions Regulator. The content of these slides should not be altered in any way.

Staging by employee number

Employee No. Staging date

120,000 or more 1 Oct 2012

50,000 - 119,999 1 Nov 2012

30,000 - 49,999 1 Jan 2013

20,000 - 29,999 1 Feb 2013

10,000 - 19,999 1 Mar 2013

6,000 - 9,999 1 April 2013

4,100 - 5,999 1 May 2013

4,000 - 4,099 1 June 2013

3,000 - 3,999 1 July 2013

2,000 - 2,999 1 Aug 2013

1,250 - 1,999 1 Sept 2013

800 - 1,249 1 Oct 2013

500 - 799 1 Nov 2013

350 - 499 1 Jan 2014

250 - 349 1 Feb 2014

240 - 249 Between 1st

150 - 239 April 2014 & 1st

90 - 149 April 2015

50 - 89

Auto-enrolment Key Principles

New employees auto-enrolled within 3 months

All eligible non-pension members enrolled

Employees must be enrolled and then can choose to opt out

Opt outs re-enrolled every 3 years

Employers must auto-enrol into a

Qualifying pension scheme

Certify existing pension

Employers must auto-enrol into a

Qualifying pension scheme

AE specific Scheme

NEST

Peoples Pension

Certificatio

n of existing pension

Certification of existing pensions

Pensionable

Pay If more than 85%

7%

If less than 85%

Total Pay

Total Pay

Total Pay

8% 9%

Test 1 Test 3 Test 2

How the numbers work

41,450

5,668

8%

Max 4,200 pa

Salary

9,440

0 contribution

20,000

6,500

8%

Staging & Phasing

Oct

2012

Staging

Phasing

Apr

2013

Aug

2014

Oct

2017

Oct

2018

Large

employers

Medium

employers Small / micro employers

1% employee contribution

3%

employee

5% employee

1% employer contribution 2%

employer

3% employer

Constant Assessment of Workforce

5,668

Salary

9,440

74 SPA 16 22

Age

Entitled Worker

Non-Eligible Jobholder

Record Keeping - Workers

Who the record relates to What record must be kept How long it must be kept

Job holders and workers who become

members

Name

NI Number

DOB

Gross earnings in each relevant pay

reference period

Contributions payable in each

relevant pay reference period by an

employer and the amount actually

paid if different. Includes

contributions due on behalf of

employer and deductions made from

earnings

6 Years

Additional information for jobholders

only

Automatic enrolment date

Opt-in notice (original format)

The contributions to which the

jobholder is entitled under the

scheme rules (this demonstrates

scheme is a qualifying scheme)

Opt out notice (original format)

6 years

4 years

Additional information for workers Date with effect from which the

worker became an active member

Joining notice (original format

6 years

Record Keeping - Pension

Scheme Type of pension scheme being used What record must be kept How long it must be kept

Defined contribution (DC), defined

benefit (DB) or hybrid scheme

Employer pension scheme reference

Scheme name and address

Scheme contracting out certificate (this

applies to contracted-out DB schemes

only)

Any evidence showing that a scheme

meets the test scheme standard (this

applies to not contracted out DB

schemes only)

Non UK administered schemes must

keep:

the address of the scheme

name of the authority which carries out

functions that correspond to those of the

regulator in the country where the

scheme is based

6 Years

Personal Pension Scheme Employer pension scheme reference

Name and address of the pension

provider

Non UK administered schemes must

keep:

the address of the scheme

Name of the authority which carries out

functions that correspond to those of

the regulator in the country where the

scheme is based

6 years

Reduce admin get organised!

Auto Enrolment

Date

Employer provides

information to employee

and informs pension

provider

1st of

mont

h

31st

Month 7th of

month

7th of next

month

21st

of

mont

h

Payroll cut

off

1 month enrolment window

Opt out window

No

Deduction

Refund Active Member Your

pension

pack

Look beyond the obvious

Direct cost implications of pension contributions &

set up

Compliance implications pre and post staging date

Cost & time implications of ongoing compliance &

governance.

Employer Planning

7 Key Steps for auto-enrolment

Steps 1 4 are the planning stages

Steps 4 7 are the delivery stages

Step 4 falls into both planning and delivery

Auto-Enrolment - Know when to act

Step1

Know your staging date

Step 2

Assess your workforce

Step 3

Review your pension

arrangements

Step 4

Communicate the changes to all your

workers

Step 7

Contribute to your

workers pension

Step 6

Register with

The Pensions Regulator

and keep records

Step 5

Automatically enrol your

eligible jobholders

7 Key Steps Planning,

Timescales & Responsibility: Step

1

Know your staging date

BASED ON PAYE numbers for

1/4/12. At this point you should also

be discussing cost projections

You can use postponement for up to

3 months

Must Inform the Regulator

Must confirm this to your employees

Act

Now

Review your pension arrangements

A suitable scheme must allow for

auto-enrolment without the

employee having to do anything

Consider your contractual terms:

Eligible employees may:

Opt-out and all contributions cease

Elect to be enrolled to their full

contractual entitlement (e.g. 5% + 5%)

Request to be enrolled to the minimum

AE requirement (i.e.1% + 1%) if the

scheme rules allow

Consider AE Software requirements

7 Key Steps Planning,

Timescales & Responsibility:

Step 3 12 - 9

Months

Consequences of non-compliance

It will be a criminal offence

for employer not to:

set up in first place

auto-enrol

re-enrol every 3 years

Inducement is an offence

Significant fines..

400 fixed penalty, followed by -

Consider the help you may need

- Act Early -

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 2012

2,000-2,999

160-89

Employers required to register by staging date 49 or less people in PAYE scheme

(lower estimate)

Source: The Pensions Regulator, Automatic enrolment: Staging profile and forecast volumes, September 2012

Some challenges.

Time & resource

Industry capacity crunch

Affordability for employees

Will a pension no longer be seen as benefit?

What makes your pension better than the rest?

Employee Expectations

Expectations Reality

Governance requirements

The IGG was set up to

encourage industry ownership

and promotion of the Myners

Principles and to take account

of the characteristics of DC

and the differences between

trust-based and contract-based

schemes. The IGGs new DC

principles will be followed by

guidance for small schemes

and good practice case studies

for DB schemes

Who are Secondsight?

Employee Benefits division at

Fully regulated by

Financial Conduct

Authority

Stakeholder environment

IFA of the year

http://www.second-sight.com/

Award Winning

http://www.ftbusinessevents.com/SchemeAwards2011/overview.asp

Summary

Meet legislative requirements

and employer duties

Ensure ongoing compliance

Partner with experienced award

winning team

A mutually beneficial long term

relationship

Thank you

This presentation is for information purposes only and does not constitute advice or a personalised recommendation

The value of investments can fall as well as rise

Past performance is not a reliable indicator of future results

This presentation is based on our understanding of current and proposed legislation, which may change

Tax reliefs are those that apply currently, the value of such reliefs will depend on the circumstances of the plan holder and may be subject to change in the future

What you get back at retirement cannot be guaranteed and will depend on how much you pay in, investment performance and interest rates when you retire

Secondsight is a trading style of Foster Denovo Limited

Thanks from Secondsight