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Learn about Auto Enrolment, the compulsory inclusion of all employees in a workplace pension scheme with employer contributions. Discover the historical context, why it is needed, and the timetable for implementation.
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A thank you to Rudyard Kipling… • “The elephant’s child” from the Just So Stories • “I Keep six honest serving-men: • (They taught me all I knew) • Their names are What and Where and When • And How and Why and Who.” • To paraphrase a little…
Auto Enrolment – What it is • At its simplest: • The compulsory inclusion of all employees in a workplace pension scheme with employer contributions supplementing employee contributions.
Auto Enrolment – Why is it needed? • Historical context • The UK faces a major long term challenge • People are living longer • Some workers not saving for retirement • Stakeholder Pensions introduction in April 2001, membership was voluntary and take-up low • Still an estimated 7m people not making any retirement provision • Pension Commission Report 2005 • Personal accounts • Auto Enrolment • Introduced through • Pension Act 2008 • Pension Bill 2011 • Finance Act 2011
Auto Enrolment • Finance Act 2008 • Introduced automatic enrolment into work based pension saving • Concept of ‘worker’ and ‘jobholder’ • Need not be company or other available scheme, must meet certain minimum requirements
Auto Enrolment – When is all of this taking place? • Now! • The timetable • Staging dates based on PAYE size • Starts 1 October 2012 (PAYE payroll 120,000+)
Auto Enrolment • Timetable contd • Employers with more than one PAYE ref number – largest PAYE scheme (number of persons) determines staging date that applies • Employers who share a single PAYE scheme with other employers will all have same staging date, determined by that PAYE scheme
Auto Enrolment • Timetable contd • Rules kick in from employer’s staging date • Employer can delay auto-enrolment for existing qualifying employees beyond staging date (4 years and 4 months) in respect of current, but not new, employees • Can opt to bring forward staging date
Auto Enrolment • Some terms defined • Worker = contract of employment / contract to perform services personally (excludes office holders e.g. councillors?) • Jobholder = worker, 16 or over but under 75 with qualifying earnings • Qualifying earnings (gross) = >£5,035* • * Planned to rise to £5,564 (to align with national Insurance contributions lower earnings limit) and an upper limit of £39,853.
Auto Enrolment • 3 types of employee – different treatment • “Eligible” jobholders - auto-enrolled into “qualifying scheme” • “Non-eligible” jobholders – can opt to join “qualifying scheme” • “Entitled” workers – can opt to join a scheme
Auto Enrolment • Eligible jobholders • New employees 22+ and <SPA with gross qualifying earnings with employer >£7,475* • New employees who opt out <22 or < £7,475* who attain 22 / earnings increase to >£7,475* • Have to be auto-enrolled into a “qualifying scheme” • Aggregate earnings issues • * Pensions Act 2011 – planned to rise to £8,105
Auto Enrolment • Non-eligible jobholders • New employees 16+ but <75, with qualifying earnings >£5,035* but <£7,475** • New employees 16+ but <22, or SPA+ and <75, with qualifying earnings >£7,475** • Can elect, in writing to employer, to join “qualifying scheme” • * Planned to rise to £5,564 ** Pensions Act 2011 – planned to rise to £8,105
Auto Enrolment • Entitled workers • New employees 16+ and <75 earning £5,035* or less • Can elect, in writing to employer, to join a scheme • * Planned to rise to £5,564
Auto Enrolment • How this works for the LGPS • Currently, all employees 16+ and <75 eligible to join LGPS (except < 3 month contracts) • Potential amendments to the LGPS so that: • all eligible employees automatically join LGPS • those with <3 month contracts can opt in
Auto Enrolment • Information requirements – eligible jobholder • Within 1 month of auto-enrolment date tell eligible jobholder: • - they’ve been enrolled + enrolment date • - contact details for scheme and where they can get further info • - contributions that will be deducted from pay and confirm tax relief given • - information on right to opt out / back in
Auto Enrolment • Information requirements eligible jobholder contd • Within 1 month of enrolment date tell MPU: • - name, gender, DOB, NI number • - home address (and work address) • - e-mail (work if provided, home if known) • - auto enrolment date • - gross earnings in pay ref period • - contributions
Auto Enrolment • Information requirements non-eligible job holder • Within 1 month of meeting conditions for being a “non-eligible” jobholder, employer must tell jobholder: • - can elect to join the “qualifying scheme” • - written election to employer must be signed • - electronic election must include statement “submitted personally” • - details of where to obtain further info • Note: if opts to join, enrolment date is first available pay ref period and info requirements would be the same as for eligible job holder
Auto Enrolment • Information requirements non-eligible jobholder contd • But: • as they will will auto-join LGPS (not opt in), info requirements replaced by: • Within 2 months of joining LGPS, tell the member • - they are an active member of a “qualifying scheme” (and you must offer a “qualifying scheme” if you cease to offer LGPS) • - where to obtain further info
Auto Enrolment • Information requirements entitled worker • Within 1 month of meeting of meeting conditions for being an “entitled” worker, employer must tell worker: • - can elect to join a scheme • - written election must be signed • electronic election must include statement “submitted personally” • - details of where to obtain further info • Note: if opts to join, enrolment date is in accordance with Scheme rules and info requirements are the same as for eligible jobholder • But will auto-join LGPS so info requirements somewhat superfluous (unless < 3 months contract)
Auto Enrolment • Opting out • Can eligible and non-eligible jobholders opt out? • Yes - after enrolled (but non-eligibles can rescind opt in before enrolment date) • Prescribed form (from administering authority) • Can opt out up to one month* after later of enrolment date or date you gave enrolment information • * 6 weeks if first form filled in incorrectly • Note: can still opt out of LGPS after one month / 6 weeks but this is then under the LGPS opt out rules
Auto Enrolment • Record keeping for opt outs • You must keep copy of opt out form for 4 years • We must keep name of optant out, date notified option out, date of cessation of membership • Going forward • Ahead of first staging date (October) we will review current forms
Auto Enrolment • Re-enrolment for eligible jobholders • Within 3 months before / after 3rd anniversary of staging date (provided continuous employment and not opted out within previous 12 months) • Thereafter, within 3 months before / after 3rd anniversary of previous chosen re-enrolment date • Information requirements same as for auto-enrolment, Opt out procedures same as for auto-enrolment
Auto Enrolment • Current LGPS members at staging date • Jobholders: • Remain in LGPS • Within 2 months of staging date, notify employee: • - remains active member of a “qualifying scheme” (and you must offer a “qualifying scheme” if ceases to offer LGPS) • - where to obtain further info • Entitled workers • Remain in LGPS • No info requirements
Auto Enrolment • Current eligible jobholders who have already opted out of LGPS • Auto-enrol from the staging date (even if opted out within 12 months prior to staging date) • But you can opt for transitional delay (4 years and 4 months) • need to tell those eligible jobholders that this has happened and that they can elect to join
Auto Enrolment • Non-eligible jobholders and entitled workers who have already opted out of LGPS • give information about right to opt in from staging date (or date they become non-eligible jobholder*) even if opted out within 12 months prior to staging date • * e.g. employee earnings increase to >£5,035 (planned to rise to £5,564)
Auto Enrolment • A few issues • You are responsible for enrolment / re-enrolment process • no current off the shelf solutions • Should you opt for earlier staging date? • Should you use the transitional period? • If you don’t offer LGPS to all employees
Auto Enrolment – Who? (again) • Responsibilities • Employer • Administering Authority • Overall – The Pensions Regulator
Auto Enrolment • Practicalities • Contributions • Conts to be paid over electronically by 22nd of following month (or by 19th in any other case) • Compliance • If conts not paid within 3 months of due date, you can be made to pay all contributions • Regulator has powers to impose penalties for non-compliance with contravention notices • Registration • Provide Pensions Regulator with info, within 4 months of staging date saying how you have complied with your duties • Record keeping • keep records to enable Regulator to check compliance • Records normally to be kept for 6 years
It’s not just hefty fines from the Regulator! The Pensions Act 2008, Section 45(2) • “A person guilty of an offence under this section is liable - • on conviction on indictment, to imprisonment for a term not exceeding two years, or to a fine, or both; • on summary conviction to a fine not exceeding the statutory maximum.”
Auto Enrolment – Where can further information be found? • Employer internet site • Micro-site with links to: • these slides; • external resources, e.g. The Pensions Regulator • And - coming soon: • The Local Government Group (formerly the Local Government Employers organisation) Guide to Auto Enrolment
