Auto-Enrolment- What is actually means

From 2012for the first time, all UK employers will have to contribute towards a pension plan for their employees

Employer Duties – areas covered

• Staging Dates

• Defining the Workforce

• Assessing the Workforce

• Selecting a Suitable Pension

• The Auto-Enrolment Process

• Processing Opt –Outs

• Re-enrolment

• Record Keeping

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 1 April 2014 150 - 239 1 May 2014 90 - 149 1 June 2014 50 - 89 1 July 2014

Defining the Workforce

• A person is a ‘worker’ if;

• they work under a contract of employment, or,

• they have a contract to perform work or services personally

Assessing the Workforce

Triggers•Staging date•First date of employment•End of 3 month ‘postponement’ period•Receipt of ‘opt in’ form•Attaining age of 22•Earnings hurdle cleared•3 year re-enrolment

Assessing the Workforce

• Aged 16-74• Working in the UK• Earning below £5,035

• Aged 22 to SPA• Working in the UK• Earning above £7,475

• Aged 16-21 or SPA-74• Working in the UK• Earning above £7475Or• Aged 16-74• Working in the UK• Earning above £5,035 but

below £7,475

Entitled Worker

Eligible Jobholder

Non-eligible

Jobholder

Have the right to

join / opt in

What has to happen for each category?

Categories of Worker What the employer has to do

Eligible Jobholder

• Employer must automatically enrol and make contributions• If using postponement, the employer must provide notification to the eligible jobholder• Employee must process any opt out notice• Employer must automatically re-enrol approximately every 3 years• Employer must keep records of the automatic enrolment process

Non-eligible Jobholder

• Has the right to opt in and the employer must arrange pension scheme membership if employee opts in• Employer must provide information about the right to opt in, unless using postponement• If using postponement, the employer must provide notification to the non-eligible jobholder• Employer must process any opt out notice• Employer must keep records of the enrolment process

Entitled Worker

• Has the right to join and the employer must arrange pension scheme membership in employee decides to join• Employer must provide information about the right to join, unless using postponement• If using postponement, the employer must provide notification to the entitled worker• Employer must keep records of the joining process

Employers must auto-enrol into a ‘Qualifying’ pension scheme

1. Use NEST2. ‘Certify’ own

existing group pension

How much to pay - ‘Certification’ of existing schemes

Pensionable Pay If more

than 85% 7%

If less than 85%

Total Pay

Total Pay

Total Pay

8% 9%

Option 1

Option 3Option 2

How much to pay - NEST

£38,185

£5,715

£32,470

8% Total

Contribution £2,597.60

Max £4,200 pa

Salary

£7,336

0 contribution

£20,000

£6,500

8% Total Contribution £1142.80

Auto Enrolment Process & Timeline

Auto Enrolment Date

1 month joining window

Employer provides information to

employee and informs pension provider

1st of month

31st M

onth

14th of m

onth

14th of n

ext m

onth

21st of m

onth

Payroll cut off

Opt out window

No DeductionRefund

Postponement

3 monthsPaid up membership

Opt Outs and Re-enrolment

• Not available from employer• Check validity of notice• If invalid, inform why and allow 2 extra weeks• Notify Pension Scheme• Stop the deduction and payment of

contribution• Refund contribution if necessary• Record• Re-enrol in 3 years

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 SchemeType 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

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

– make an inducement

Individuals not just employers

• Trustees or managers of pension scheme

• Payroll administrators• Accountants• Scheme administrators

Fines:

£400 Fixed penalty

Up to £10,000 per day