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AUTOMATIC ENROLMENT WHAT ARE THE RULES? WHAT DOES IT MEAN FOR EMPLOYERS? ROBERT COCHRAN 13 th MAY 2014.

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agenda

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  1. AUTOMATIC ENROLMENTWHAT ARE THE RULES?WHAT DOES IT MEAN FOR EMPLOYERS?ROBERT COCHRAN13th MAY 2014 The slides are authorised for use by accredited Scottish Widows staff in corporate pensions presentations to employers, trustees and UK financial advisers and should not be distributed to or relied upon by any other person.

  2. agenda • HOW BIG A CHANGE IS AUTOMATIC ENROLMENT? • WHAT ARE THE RULES? • IMPACT ON EMPLOYERS • Q&A Rules

  3. HOW BIG A CHANGE A tidal wave of schemes and new members is set to hit the UK pensions providers. Corporate Adviser, September 2013

  4. CAPACITY PRESSURE FOR ALL • 1.35 million employers • 21,000 advisers • How many schemes per adviser? • 64 • How many schemes have been written in the last 20 years? • 200,000

  5. HOW BIG A CHANGE Thischartillustratestheproportionofemployersandemployees fallingintoeachofthesefivecategories. 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Employers HighProvisionwithoutaWaitingPeriod Employment HighProvisionwithaWaitingPeriod BorderlineProvision PoorProvision No/ShellProvision Source:EmployerPensionProvisionSurvey2009,DepartmentforWorkandPensions.

  6. Who’s eligible for automatic enrolment? ASSESSING AND CATEGORISING THE WORKFORCE 2014/2015 LEVELS Eligible jobholder

  7. IT’S ALL ABOUT THE QUALITY OF THE DATA EMAIL EXTRACT (RECIEVED AUGUST 2013) – STRUGGLING WITH DATA ISSUES • I’ve opted for Plan B.  We’re asking all employees to come to the NEC in Birmingham tomorrow.  • We’ll then do a hands up as to whose in a pension plan, they can then go.   Who’s 21 or under, or over state pension age, they’re on the bus out immediately.  • Next out are those earning less than £787.   • With the remainder, we’ll ask them who they are, where they live, what their NINO is, email address, and so on.  They’ll then be auto enrolled and will be free to leave.  • This will be called the Thomson Pettigrew auto enrolment method, similar in its eventual complexity to the Duckworth Lewis method for determining who’s won in a game of cricket shortened by rain. • Seriously though, I’m sat with an envelope and pen, and would appreciate a little help.  Can you call me when you’re free, please? 

  8. CONTRIBUTIONS – PHASING IN BASED ON QUALIFYING BAND EARNINGS

  9. Simplified certifications options QUALIFYING EARNINGS DEFINITION (2014/15) – P60 INCOME FROM £5,772 TO £41,685

  10. OPTING OUT OPTING OUT Engageyour workforce 1month window Optout notice Fillin notice Refund worker Inform provider Refund employer REVIEW Engageyour workforce 1month window Optout notice Refund worker Inform provider Refund employer Fillin notice Every3years Default‘re-enrolmentdate’is3rdanniversaryofemployerstagingdate.

  11. ADDITIONAL REQUIREMENTS ALL EMPLOYERS WILL HAVE ADDITIONAL REGULATORY REQUIREMENTS • Employersprohibitedfromincentivisingoptouts. • RegisterwithTPRtoshowtheyaremeetingtheirduties. • Paymentswillbemonitoredbyadministratorsor schemetrusteeswhoneedtoreportfailures. • Mustkeep records forsixyears. • Mustretainoptinandoptoutnoticesforfouryears CHECKLIST

  12. Employers – who deals with automatic enrolment issues? PENSIONS DEPARTMENT/ HUMAN RESOURCES LARGE PAYROLL MEDIUM SMALL OWNER

  13. EMPLOYERS NEED TO BE THINKING ACROSS THREE AREAS HR, Payroll & Finance Change to Systems/Processes Hard cost of contributions Compliance and registering • Administration • Set up & Day 1 costs • Ongoing costs • Eligible employee • Non eligible employees • Avoiding risk and failure • Governance Framework

  14. I’m an employer – what do I need to know? ? • WhendoIhavetohavemyschemeinplace? • WhodoIhavetoenrolintothescheme? • Howmuchisitgoingtocost? • Whataremyoptionsintermsofprovidinganeligiblescheme? • IsthereanythingIcandotofundmoreefficiently? • WhatsystemsdoIneedfortheadministration?

  15. When do I have to have my scheme in place? EMPLOYER STAGING DATES * Please note that there are nine staging dates within this period, depending on the employer’s size. For further information, please visit The Pension Regulator website.

  16. Who do I have to enrol and how much will it cost?

  17. Employer report • Stagingdatecalculation. • Employertimeline. • Checkcertificationofexistingscheme. • Workforceassessment. • Employercashflowmodeling.

  18. What are my options for providing an eligible scheme? • DefinedBenefitoccupationaltrustbased. • DefinedContributionoccupationaltrustbased. • GroupPersonalPension. • GroupStakeholder. • MultiEmployerTrust. • People’sPension. • Now:Pensions. • Nest. Same contribution test.

  19. Is there anything I can do to fund this more efficiently? Source:CorporateAdviser,September2010.

  20. Why salary exchange? POTENTIAL INCREASED CONTRIBUTION OVER NORMAL NET PAY METHOD POTENTIAL INCREASED CONTRIBUTION OVER NORMAL NET PAY METHOD EARNINGS£50,000 EARNINGS£30,000 33.9% 17.7% *Assumesnettakehomepayremainsthesame,employer100%NIreinvested.

  21. Online automatic enrolment solution – an integrated approach Employer payrollfile *BestGroupPensionProviderAward,CorporateAdviser2013.

  22. Payroll providers or third party solutions - what can they do? Everything Assessment & Contributions Communications Opt-outs No AssistMe Back office link Partial Assessment Contribution Calculations 1 Pass AssistMe Nothing Collect Contributions 2 Pass AssistMe

  23. adequacy MEDIAN INCOME EARNER…..SAVING FOR 40 YEARS. 60-66%1 Automatic Enrolment Additional Savings 45% 30% target income replacement rate state pension & auto enrolment state pension Source: Making Automatic Enrolment work – Oct 2010 1A New Pension Settlement for the 21st century, second report, Pensions Commission, Nov 2005, Govt target by 2053

  24. IMPACT PENSIONS REPLACEMENT AMOUNT THROUGH AUTO ENROLMENT – 30 YEAR OLD SAVER ALL 68% £15,000 Salary ALL 44% £30,000 Salary ALL 28% £90,000 Salary Source: Scottish Widows Replacement Calculator

  25. RETIREMENT EXPECTATIONS Source:ScottishWidowsUKPensionsReport,June2013 NinthAnnualPensionsReport,Retirementsavingsacrossthenation.

  26. WHAT CAN YOU EXPECT FROM YOUR PENSION PROVIDER? Whatproviderscandotohelpyoumake automaticenrolmentasuccess. • Benefitofexperience. • Technologytomeetyourneeds. • Robustcommunications. • Educationandemployeeengagement.

  27. DISCLAIMER ThispresentationrepresentsScottishWidows’interpretationofcurrentandproposedlegislation andHM Revenue&Customspracticeasatthedateofpublication–thesemaychangeinfuture. ThismaterialisforusebyUKFinancialAdvisersonly.Itisnotintendedforonwardtransmission toprivate customersandshouldnotberelieduponbyanyotherperson. ScottishWidowsplc.RegisteredinScotlandNo.199549.RegisteredOfficeintheUnitedKingdomat69MorrisonStreet,EdinburghEH38YF.Telephone:01316556000. AuthorisedbythePrudentialRegulationAuthorityandregulatedbytheFinancialConductAuthorityandthePrudentialRegulationAuthority. FinancialServicesRegisternumber191517. 2441707/13

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