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Workplace Pensions: Auto Enrolment and NEST

A worrying number of people are setting nothing aside for their retirement, nor are their employers running any kind of pension scheme. It is estimated that we will need an additional £300 billion between us in savings if we are to retire on 70% of our salaries.

The Government therefore has passed new legislation in an attempt to address this huge savings gap in the UK. The new law affects all employers in the UK, some 1.3 million businesses. Single-person companies seem to be excluded for the time being, but all other firms will need to take action to comply with the new system that began in October 2012.

Workplace Pensions: Employers’ Obligations

The new legislation places new responsibilities on employers, who will have to complete a number of varied and new tasks to ensure compliance with the new rules:

Workplace Pensions: Employer Obligations

Auto-Enrolment

A system of auto-enrolment will be introduced meaning employers will automatically enrol all of their ‘eligible jobholders’ into a pension scheme:

  • This still includes temporary and contract workers
  • There will be a process giving an option to opt-out, albeit temporarily
  • Employees will have to receive an employer contribution if they stay in

Eligible Jobholders are currently defined as anyone:

  1. Aged between 22 and state pension age, and
  2. Earning above £10,000 (2016/17), and
  3. Who ordinarily work in the UK

Contributions

Both employees and employers will need to start saving!

For a money purchase scheme, contributions for every jobholder have to be at least 8% of qualifying earnings:

  • at least 3% from the company
  • balance of 5% from employee, including tax relief

Qualifying earnings

  • £5,824 and £43,000 a year (2016/17)
  • Earnings include salary, commission, bonuses, overtime, statutory sick pay and statutory maternity pay

Qualifying workplace pension schemes

Employers will need to ensure that they have a qualifying pension scheme ready and able to comply with the new laws:

  • A qualifying scheme:
    • Legislative minimum contributions are paid
    • Personal pension or occupational pension scheme
    • Can auto-enrol jobholders
      • And re-enrol opt outs every three years
    • Has a ‘no member decision’ option
      • Default investment fund
  • Can be a private scheme or approved scheme such as ‘NEST’ or ‘The People’s Pension’
Employer payroll size Staging date
250 or more Between 1 October 2012 and 1 February 2014
(determined by number of persons)
50 to 249 Between 1 April 2014 and 1 April 2015
(determined by number of persons)
30 to 49 Between 1 August 2015 to 1 October 2015
(determined by number of persons)
Fewer than 30 Between 1 January 2016 and 1 April 2017
(determined by last two characters of PAYE reference number)
New companies established
on or after 1 April 2012
1 May 2017 – 1 February 2018
(determined by date of first PAYE income)

Questions to ask yourself about your company pension scheme

Employers are well advised to start planning now and to start analysing and assessing their own company position and strategy:

  • How do you plan to meet the cost?
  • What’s your staging date?
  • What does your current pension provision look like?
  • What’s your expected opt-out rate?
  • Do you want to auto-enrol your people earlier than your staging date?
  • How will you manage your auto-enrolment costs?
  • Do you need help assessing your workforce?
  • Does your existing scheme meet the qualifying criteria?
  • Do you want to use your existing scheme or a set up a new scheme?
  • Do you want to use different solutions for different employees?
  • Which solution will you use for which employees?
  • Do you offer flexible benefits?
  • Does your scheme have a default fund?
  • Have you considered salary sacrifice?
  • Will you self-certify your scheme?
  • Do you want to contribute more than the regulatory minimum?
  • Have you discussed auto-enrolment with your payroll provider?
  • Will you implement a waiting period for scheme entry?
  • Do your employees have any individual pensions?
  • What’s your pension reform strategy?

How we can help

We can provide advice and support for a company at each stage of the process:

1. Initial Consultation & Pre-Implementation Report

For a fixed fee, we can prepare a report that will detail your responsibilities and action points, and form a solid base for implementing a work based scheme at your company.

What we will cover in the initial consultation:

      • One face to face meeting to establish requirements and objectives for scheme.
      • Communication strategy for all staff.
      • Exploration of phasing of contributions.
      • Auto-Enrolment compliance – advise on legislative requirements of new arrangement.
      • Guidance on safeguarding workers’ rights.

What we will include in the pre-implementation report:

      • A comprehensive report setting out all of the duties and responsibilities of the employer in preparation for Auto Enrolment.
      • Guidance on how to determine your Auto Enrolment staging date as well as exploring bringing staging date forward to align with your company year-end/scheme renewal date.
      • Guidance on member participation rules.
      • Analyse employee demographic and appropriate segmentation.
      • Raise awareness regarding the possible impact of Auto Enrolment on Primary, Enhanced and Fixed protection for your employees.
      • A model to illustrate the financial impact of Auto Enrolment on your business.
      • Assistance on the various contribution levels/bases that may be used.
      • Guidance on postponement and where this might be appropriate for consideration by you.
      • A comprehensive review of any existing pension arrangements to check their suitability for Auto Enrolment or to identify any changes needed.

 

2. Provider Recommendation

For a larger fixed fee, we can also go on to advise on a suitable scheme for your company.

What we will do for the provider recommendation:

        • Analyse all available group pension contracts from all scheme providers
        • Charges
        • Fund Choice
        • Financial Strength of Provider
        • Flexibility
        • Select the most appropriate provider to best achieve your desired objectives
        • Provide a group presentation to your staff or senior management as required
        • Provide a Pension Scheme Helpline service prior to implementation for your staff and senior management
        • Salary Sacrifice Report and Recommendation for the Scheme

For expert advice, call 020 7101 2817 now, or why not request a call back?