Evolving Reward & Benefits Auto Enrolment – are you ready?

Presented by

Peter Waller, Chairman

Today’s Session

Auto enrolment – getting you ready• What is changing

• How

• When

• For who

Interactive session and discussion

Practical implementation thoughts

BENEFEX BACKGROUND

Who are Benefex?

Deliver Reward & Benefits for over 1 million employeesEnd to end – from design and communication to technology and ongoing supportWon over 20 industry awardsMost secure Reward & Benefits provider in the UKLive in 25 countriesWhatever your strategic roadmap we can deliver it

AUTO ENROLMENT

Why make pensions compulsory?

13.9MPeople have no workplace pension

provision

Source: NAPF

86% of

employers have no workplace pension

provision

31% of

employees do not take up the offer of

an employer contribution

7 MillionEmployees are not saving enough for

retirement

Source: DWP

55% of

the entire UK workforce not saving

enough for retirement

So where did it come from…

The Pensions Act 2008 – Workplace Pension Reforms

Structured around reforming the current pensions system to address both this savings gap and also the pensions crisis

Paved the way for:1. A compliance scheme enforced by the Pensions Regulator – Auto Enrolment

2. A new workplace savings scheme called the National Employment Savings Trust (NEST)

The Pensions Bill 2011

Still not all agreed

So by October 2016…

All organisations must enrol employees in a ‘qualifying scheme’All organisations must also:

• Make a min. contribution for each employee• Provide information about the scheme to all employees• Deduct contributions from their wages• Send contributions to the pension scheme provider• Register with the regulator• Maintain scheme records

Auto enrolment – what we expect to see

It will boost membership levels particularly in:•Lower earners•Minority ethnic groups •Women

Of the additional 7 million people who will start saving:•0.5M will go into a brand new scheme•2.5M will go into an existing scheme•4.0M will go into NEST

Auto enrolment – lessons learned

Government predictions of 55% to 80% take up with a 75% central estimateCurrent schemes (NAPF UK Survey data):

• Where auto enrolment – 89% take up (US = 91%)• Where voluntary joining – 42% take up (US = 61%)

Combined survey data points to:• 54% stay in• 46% opt out

In New Zealand – Kiwi-Saver = 63% take up

WHO?

Who do you need to auto enrol – Age?

16 65

22 and

above

State Pension

Age

EMPLOYEES UNDER 22 BUT

OVER 16Do not need to be opted in but must be provided information and the right to opt in if they wish

EMPLOYEES STATE PENSION AGE

BUT UNDER 75Treated same as under 22.At 75 contributions must stop.

Auto Enrolled Based on Age

Works in the UK (or ordinarily in the UK) under a UK contract

Who do you need to auto enrol – Earnings?

£0 £50,000

Auto Enrolled Based on Earnings

Below this there is no requirement to join but can join if they choose. No employer requirement for contribution below £5,715.

Once over £7,475 we need to auto enrol all employees. Rules to prevent ’accidental’ enrolments (e.g. bonus one month putting you over £7,475)

‘Earnings’ includes bonuses, over time and statutory maternity, paternity and adoption pay

Over £7,4752011-2012

WHEN?

Timing of your obligations

OCTOBER 2012

Employers with PAYE schemes of over 120,000 employees

Group 1

AUG 2014 to FEB 2016

Employers with small PAYE schemes fewer than 50 employees (a sample of these will need to be live for March 2014) Group 4

PENALTY TIME!

All employers should have

started auto enrolment.

New businesses will need to

offer it from day one

NOV 2012 to MAR

2013

Employers with large PAYE schemes 10,000 to 120,000 employees

Group 2

OCT 2013 to JUL 2014

Employees with small PAYE schemes 50 to 1,249 employees

Group 4

MAR 2016 to SEP 2016

Employers setup with new PAYE schemes between April 2012 and 2016 Remainder

APR 2013 to SEPT 2013

Employers with medium PAYE schemes 1,250 to 9,999 employees

Group 3

Timing – Processing Employees

Month 1 Month 3 Month 6+

You can choose when to enrol employee here

‘Waiting Period’

BackdatingEmployees have the right to request backdated contributions

Short Term Contracts<3 months can be excluded

Prevented from postponing if you have done so in the last 12 months

Qualifying DB Schemes Qualifying DB Schemes are able to defer auto enrolment until Oct 2016

Opting out

All employees have the right to opt out but must be an‘active’ decisionIt must be on paper and with a ‘wet’ signatureAdministrative onus sits with EmployerMust opt people back into the scheme in 3 yearsEmployers cannot promote opt out in any wayCannot recruit people on the basis that they will opt outNot able to induce or incentivise people to opt out

WHAT?

What will you have to pay?

£0 £50,000

Over

£5,715 Qualifying Earnings

Lower Limit will increase each year in line with the threshold at which National Insurance is paid

Note: ‘Earnings’ includes bonuses, overtime and statutory maternity, paternity and adoption pay

Under£38,1

85

Upper Limit will increase each year in line with average earnings

What will you have to pay – min. contributions

Rules require both a min. total contribution and min. employer contributionBased on either:

• % of qualifying earnings for NEST• % of pensionable pay for other qualifying schemes

For most defined contribution schemes total contributions will• Start at 2% (total) on your ‘staging’ date; and • Increase to 8% (total) by 2017

Minimum contributions

Total can be paid for• Entirely by the employer• Combination of employer and

employee

Contribution limits• To NEST are capped at £4,200 per

annum• Other qualifying schemes are

uncapped• High earner restrictions remain

*Example of employee contribution is less basic tax relief of 20%

Employers will need to assess that contributions (or accruals)are sufficient.

And certify minimum requirements are met

SO WHERE IS EVERYONE ON THIS?INTERACTIVE SESSION

WHAT ARE WE SEEING HAPPEN?

What strategies are we seeing in practice

Qualifying Scheme Only

Organisations with a qualifying structure

and supportive provider are rolling

these out to all

SplitCombination of NEST

for one population and qualifying

scheme for another

CombinationEveryone in NEST up

to the Maximum contribution then

anything above into other scheme

Minimum Conts

Applying the absolute minimum

contribution for new joiners ensure min. additional budget

spend

Levelling DownOffering all

employees the minimum legal

contribution regardless of historic

entitlement.

RecruitmentActive recruitment of

excluded groups. Limiting contracted hours and therefore potential additional

costs.

What can we do to help?

• ENROLLER™ – Design Planning, strategy and creating a roadmap for delivery of Auto Enrolment including the business case

• ENROLLER™ – Communicate Whether utilising bespoke or off the shelf tool we are able to assist you with communicating the change to you every employee

• ENROLLER™ – Complete Whatever your scheme we can provide a full end to end auto enrolment service including our Compliance Guarantee™

Join us on Just fancy a chat about it…feel free to call the team on 0845 129 8636 or email

autoenrolment@benefex.co.uk

Thank you, any questions?