MERCER WEBCAST

AUTO-ENROLMENT:A SURVIVAL GUIDE FOR SMEsAUGUST 7, 2013

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Craig Haines & Ian ForwardElect by Mercer Marsh Benefits

Bristol

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Objectives for today6 steps to survival (and success!)

1. Know your facts

2. Be aware of the key impacts

3. Engage your support team

4. Assess your workforce and data requirements

5. Review your current arrangements

6. Communicate the changes

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Craig HainesElect

Ian ForwardElect

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STEP 1: Know your factsWhat is auto-enrolment?

• The government has introduced a law starting in October 2012 to makeit easier for people to save for their retirement.

• It requires all employers to enrol their staff into a workplace pensionscheme.

• Both the employer and the employee will have to contribute a minimumfinancial amount.

• The Pensions Regulator has releaseddetailed guidance on employers’ duties.

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STEP 1: Know your factsExplaining the jargon

worker

jobholder

qualifying earningsqualifying scheme

staging date

eligibility

?

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STEP 1: Know your factsWhen will it apply to me?

Employer size(by PAYE scheme size) or otherdescription

Automatic enrolment duty date

From To

To 250 or more members 1 October 2012 1 February 2014

50 to 249 members 1 April 2014 1 April 2015

30 to 49 members 1 August 2015 1 October 2015

Less than 30 members (dependenton PAYE reference number) 1 June 2015 1 April 2017

Employers without PAYE schemes 1 April 2017 ---

The staging date is the date on which employers need to enrol ‘eligible jobholders’ andstart making contributions to a ‘qualifying scheme’. This is based on employer size, asmeasured by the number of employees on the PAYE payroll.

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STEP 1: Know your factsWho does it apply to?

Earnings*

Age (inclusive)

16-21 22 – SPA ** SPA**– 74

Under lower earnings threshold (£5,668) Entitled worker

Between £5,668 - £9,440 Non-eligible jobholder

Over earnings trigger for automaticenrolment (£9,440)

Non-eligiblejobholder

Eligible jobholder Non-eligiblejobholder

* All earnings figures are in 2013/14 terms** State Pension Age

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.

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STEP 2: Be aware of the key impacts

• How much will you need to pay?

• How will you manage your data?

• Can you use your current scheme?

• How will it affect your market position?

• What is the overall cost of auto-enrolment?

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How ready do you feel you are for auto-enrolment?

• Extremely prepared

• Somewhat prepared

• A little unprepared

• Not at all prepared

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STEP 3: Engage your support teamCreate a working party

WHO SHOULD BE INCLUDED?

Some or all of the following:

• Payroll, HR, Finance, IT Support

• Your pension advisers and payroll provider

Appoint a Project Manager.

WHEN SHOULD IT MEET?

Schedule meetings now up to staging date to get in diaries.

HOW SHOULD IT OPERATE?

Agenda: Set it regularly. Make sure you update the group on any issues.

WHAT SHOULD IT DO?

Responsible as a group for delivering the project to completion.

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Workforce• It is important that you can identify all of

your workers in order that you candetermine their eligibility. These include:– Salaried staff– Contract workers– Offshore workers– Expatriates– Casuals & temporary workers– Zero hours

• Have you made any alternative pensionarrangements with your employees?

Pay elements• Do you know all of your different pay

elements?

• Do you know how these fit within thedefinitions of:– Qualifying Earnings– Basic Salary– Pensionable Salary– Total Pay

• How will you categorise your staff?

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STEP 4: Assess your workforceCreate a working party

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STEP 4: Assess your workforceLegal minimum contribution rates

* Tier 2 : Pensionable Earnings under Tier 2 must be greater than Basic Salary and at least 85% of total earningsacross the scheme

Minimumcontributions Requirements for self certifying

Salarydefinition

Qualifying earnings(£5,564 to £42,475

in 2012/13)Basic salary Pensionable

Earnings * Total earnings

ContributionTotal Contribution

8%(Min. Employer 3%)

Total 9%(Min. Employer

4%)

Total 8%(Min. Employer

3%)

Total 7%(Min. Employer

3%)

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STEP 4: Assess your data requirementsAre your existing systems fit for purpose?

• Assessment needs to take place every pay reference period

• Systems need to:– Determine eligibility– Enrol employees– Issue communications

• Who will have the responsibility for this?– HR– Payroll

• Timelines are critical

• Check:– Does your payroll provider support this?– Does you pension provider support this?– Can you manage this manually?

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STEP 5: Review your current arrangements

If you have an existing pension scheme, there are a number of options:

• Use an existing pension arrangement as long as it is deemed suitable(meets the qualifying criteria)

• Set up your own qualifying scheme, or adjust an existing scheme so thatit meets the qualifying criteria

• Enrol employees into NEST or another suitable pension scheme

“If you have already got a qualifying pension in place,don’t assume it will be less work…”

“If you have already got a qualifying pension in place, don’t assume itlKevin O’Boyle, Head of Pensions at BT

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STEP 6: Communicate the changesWhat, when and how will you tell employees?

• What do they need to do and why?

• When will they be enrolled?

• Who can they contact?

• What will it cost them? - employee and employer contribution values by pay

reference period

• Options and implications of opting out

How do you promote this as a benefit to employees?

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What is the cost of auto-enrolment?

• Employer contributions

• Employee communications

• Managing your scheme

• Your other benefits

• Non-compliance

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Other considerations

• Statutory employee consultation may be required

• Review of employment contracts

• Review new hire process and documentation:– Offer letters– Contracts

• Transition process for current scheme members

• Cost of changes to contribution structures and increased membership

• Employee communication

• Impact on current pension providers– e.g. Capabilities, services, pricing

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How we can help6 steps to survival (and success!)

1607 August 2013

1. Know your facts

2. Be aware of the key impacts

3. Engage your support team

4. Assess your workforce and data requirements

5. Review your current arrangements

6. Communicate the changes

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Further Information

Visit our auto-enrolment homepage…

http://www.electemployeebenefits.co.uk/solutions/auto-enrolment-for-SMEs

Or contact us….

Craig Haines

craig.haines@mercer.com

+44 (0)117 988 7439

MERCER WEBCAST 18August 7, 2013

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Craig HainesElect

Ian ForwardElect