Plan Auto Enrolment

Getting ready for pension Auto Enrolment

New pension legislation was implemented from October 2012 and will affect all employers. The date by which all employers must comply will vary according to the number of employees, and is known as your ‘Staging Date’ of which you are notified by The Pensions Regulator 12 months hence.

Employer and employee contributions are phased as follows:

Date Total must be
at least:
Employer must
pay at least:
 
From Staging Date
to September 2017
2% 1% Agreement must be in place for worker to make up at least any difference between the total and the employer amount.
From October 2017
to September 2018
5% 2%
From October 2018
onwards
8% 3%

Did you know?

Implementing Auto Enrolment involves more than setting up a pension scheme. It brings together several business functions such as Human Resources, payroll and pension administration.

For all companies it is essential to be aware of these changes. These new employer duties are designed to encourage more people to save for their retirement. They are detailed within hundreds of pages of legislation which cover what the duties are, when they will apply and what happens if you do not comply with them.

So it is likely you will need the help of an expert to guide you through the changes and make sure you are able to meet your new employer obligations. Plan Money are experienced pension advisers and are well placed to help you prepare for the changes you will have to make.

Here are some things you need to do before your Staging Date:

  1. Categorise workforce and decide how it will be structured on your staging date to determine what duties you will have for each type of worker.
Jobholders Workers
Eligible jobholder

- Aged 22-SPA
- Working in UK
- Earning >£10,000
Non-eligible jobholder

- Aged 16-21 or SPA-74
- Working in UK
- Earning >£10,000

  OR

- Aged 16-74
- Working in UK
- Earning >£5,772 but
  <£10,000
Entitled workers

- Aged 16-74
- Working in UK
- Earning <£5,772
Must be automatically enrolled Have a right to opt in Have a right to join
  1. Analyse and select your most effective definition of Pensionable Earnings.
  2. Review any current pension scheme you may have in place to determine how it compares to the new requirements and what changes you need to make, if able to.
  3. Analyse the business impact (cash flow and administration burden).
  4. Consider the merits of Salary Exchange.
  5. Consider postponement and how to manage opt-in & opt-outs.
  6. Analyse payroll software for compatibility.
  7. Conduct due diligence on available schemes.
  8. Engage with your pension and payroll providers.
  9. Develop a compliant employee communication strategy.

What has been a common theme with all the cases we have been involved in is the understandable misconception from business owners that Auto Enrolment (AE) is primarily about setting up a pension scheme. The reality is very different and scheme selection is a relatively small part of the process. The AE process brings together several business functions such as Human Resources, payroll and pension administration. The reality has been that the business assessment and earnings structure considerations ahead of selecting a scheme provider has been at least of equal importance, if not more so.

Another misconception is that to avoid perceived complications the employer could always simply default to NEST (National Employment Savings Trust) which is the government-backed scheme. NEST is only one of several options, all with their merits, which should be considered in line with each employer’s individual circumstances.

Here are some things you need to do after your Staging Date:

  1. You must register with The Pensions Regulator within five months of your Staging Date.
  2. It is essential to maintain records as an audit trail to prove compliance with the employer duties.
  3. Continue to automatically enrol certain workers into your pension scheme.
  4. Run an opt in / joining process for other workers.
  5. Ensure the correct contributions are deducted and paid into the pension scheme.
  6. Manage opt outs, process refunds and re-enrol workers roughly every three years.
  7. Monitor age and earnings regularly as workers can move between different categories.
  8. Re-register with The Pensions Regulator roughly every three years.

Plan Money has developed a four stage service to help your business comply with the key Auto Enrolment obligations.

We have identified four key stages for which we will provide a summary report.

Staging Date Assessment

An initial meeting to provide an overview of the Automatic Enrolment process and to gauge corporate objectives.

A short report detailing your Staging Date and employer duties.

Business Impact Assessment

An assessment of the workforce.
An estimation of the additional cost of contributions.
Advice on the structure of qualifying earnings
Review existing pension schemes if applicable.

Auto Enrolment Scheme Design

Research and analysis of the schemes available.
A recommendation of the most suitable scheme(s).

New Scheme Set Up

 

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