An employers’ guide to pension auto-enrolment

• Tell all eligible jobholders that they have been automatically enrolled and that they have the right to opt out;

• Register with the Pensions Regulator and provide details of your pension scheme and the number of people you have automatically enrolled.

When are the changes coming in? The reforms are being rolled out from 1 October 2012, starting with companies with the largest PAYE scheme first. The criteria has changed from number of workers to size of PAYE scheme, which means that some small employers that had less than 50 workers at 1 April 2012, but more than 50 on their PAYE scheme may have had their date brought forward, in which case it is possible to move to a later prescribed date.

For those with PAYE schemes with fewer than 50 members the staging date will depend on the size of PAYE scheme and reference numbers. If this applies to you, please contact us or the Pensions Regulator for information on your staging date, otherwise use the table below:

PAYE scheme size or reference

Staging date

120,000 or more 01-Oct-12

50,000-119,999 01-Nov-12

30,000-49,999 01-Jan-13

20,000-29,999 01-Feb-13

10,000-19,999 01-Mar-13

6,000-9,999 01-Apr-13

4,100-5,999 01-May-13

4,000-4,099 01-Jun-13

3,000-3,999 01-Jul-13

2,000-2,999 01-Aug-13

1,250-1,999 01-Sep-13

800-1,249 01-Oct-13

This guide is designed to help you understand your responsibilities as a business. As your adviser we can help your business to prepare and maintain an auto-enrolment solution, please contact us to discuss your needs.

What are the changes?As an employer you will be legally obliged to automatically enrol certain members of your staff into a qualifying pension scheme and to make a contribution towards it. When your business will need to do this will depend on your staging date – see details below.

What will I have to do?In order to comply with the law, as an employer you will have to:• Provide a qualifying pension

scheme;• Automatically enrol eligible

jobholders;• Pay employer contributions for

eligible jobholders;

Pension auto-enrolment kicked off on 1 October for the UK’s biggest businesses. Over the next five years this will gradually be rolled out until 1 April 2017, when even those businesses without a PAYE scheme will need to have an auto-enrolment pension scheme in place.

Finance UPdAtE OcTOBeR 2012

Table continues overleaf [PTO]

Business UPdAtE

You may be able to use your existing pension scheme, provided it meets certain criteria.

We can help you to establish whether you can use your existing scheme, or what changes may be required to enable you to use your existing scheme. Please contact us to find out more.

How much will I have to contribute?As an employer you will be expected to contribute a minimum amount into the qualifying pension scheme of eligible jobholders. These are expressed as a percentage of qualifying earnings - between the upper and lower threshold – proposed as £5,564 and £42,475 for 2012/13.

Contribution levels are being phased in. The proposed duration periods for defined contribution (DC) schemes are as follows:

Transitional period

Duration Employer minimum contribution

Total minimum contribution (employer and employee combined)

1 1 October 2018 onwards 1% 2%

2 1 October 2017 to 30 September 2018

2% 5%

1 October 2018 onwards 3% 8%

A scheme can also base the contributions on one of three alternatives to qualifying earnings, which may change the minimum contribution. Contact us or see the Pensions Regulator for more information.

What should I do next?There are a number of steps you should be considering now in preparation for your staging date. Please contact us to find out how we can help you with this, but here are some points to consider:1. Find out when your staging date is so that you know how long you have to

prepare;2. Assess your workforce using The Pension Regulator’s criteria to work out who

you need to automatically enrol;3. Review your pension provisions – you may have an existing scheme that will

qualify, or you may need to make a few amendments or start from scratch;4. Communicate what is happening and when to your employees;

It is important to note that employees are entitled to voluntarily opt out of auto-enrolment, but that there are a number of safeguards in place to prevent this being recommended by the employer.

PAYE scheme size or reference

Staging date

500-799 01-Nov-13

350-499 01-Jan-14

500-799 01-Nov-13

350-499 01-Jan-14

250-349 01-Feb-14

160-249 01-Apr-14

90-159 01-May-14

62-89 01-Jul-14

61 01-Aug-14

60 01-Oct-14

59 01-Nov-14

58 01-Jan-15

54-57 01-Mar-15

50-53 01-Apr-15

Who needs to be enrolled? Workers known as ‘eligible jobholders’ will need to be enrolled. These are defined as:• Those that work or ordinarily work in

the UK;• Aged between 22 and state pension

age;• Earning more than the minimum

earnings threshold £8,105 for 2012/13. Those earning more than £5,564 will also be eligible, but you will not be obliged to contribute on their behalf.

What classes as a qualifying pension scheme? The Government has created the National Employment Savings Trust (NEST), for those employers that don’t already have a pension scheme that is suitable for auto-enrolment. NEST ticks the auto-enrolment boxes, but you do not have to use NEST.

An employers’ guide to pension auto-enrolment

We can help you to prepare for auto-enrolment and its potential impact. Please contact us to find out more.

important information

This document is solely for information purposes and nothing in this document is intended to constitute advice or a recommendation. You should not make any investment decisions based upon its content. The value of investments and pensions can fall as well as rise and you may not get back the full amount you originally invested. Whilst considerable care has been taken to ensure that the information contained within this document is accurate and up-to-date, no warranty is given as to the accuracy or completeness of any information. E & OE.

Welcome to the very first issue of our new monthly newsletter; Wealth Knowledge. Each month we will be taking a look at news and events affecting different areas of wealth planning and management and whether you might need to take any action.

This month we explore the impact that Quantitative Easing could have on your pension income and the importance of checking your fixed rate savings terms. We also look at the Junior ISA statistics so far and how the EU Gender Directive could affect your life insurance premiums and annuity rates.

As always, please contact us if you would like to discuss any areas of your financial planning.

October 2012

Is Quantitative Easing damaging your pension?

We are here to help with your retirement planning, please contact us to find out more.

Quantitative Easing (QE)—the purchase of assets (mostly gilts)—was launched in 2009 as the Bank of England’s Monetary Policy Committee attempted to stabilise and boost the UK’s economy. Since then, £375 billion worth of assets have been purchased, injecting money into the economy yes, but on the other hand, pushing the yield on gilts down, which has a knock on effect on the price of annuities and pension funds that hold gilts.

QE has been criticised for this and its consequential impact on those at or nearing retirement. In July this year the Bank of England issued a report into the distributional effects of QE, which claimed that without it the UK economy would be

in a much worse state. The report did however acknowledge the negative impact on annuities although it also claimed that QE’s positive effect on bonds and equities will have compensated for the negative effect on gilts in pension funds.

The fact is that the yield on gilts is low, which means that annuities are also experiencing lows. If you are approaching retirement, you may want to consider your options.

Earlier this year National Savings and Investments (NS&I) announced a series of changes to the exit penalties and early repayment charges on a number of its savings accounts. The changes will affect all accounts bought or renewed on or after 20 September and serve as a reminder to all of us with fixed rate or term savings accounts to check terms like exit penalties regularly. Before committing to any fixed rate bond or savings account it could be worth asking yourself the following questions:

• What is the minimum investment amount?• Can I afford to be without this money for the full savings term? • Can I add to my initial investment amount? • Can I afford to pay the exit penalty if I need to access my money early?

Have you checked your exit penalties lately?

In March 2011, the European Court of Justice (ECJ) ruled that from 21 December 2012 insurers cannot use gender to determine a consumers’ insurance need. The potential impact on car insurance premiums has been widely publicised, but this ruling will also affect life insurance and annuities.

The EU Gender Directive – how will life insurance & annuities be affected?

Historically women have paid lower life insurance premiums than their male counterparts due to having a higher life expectancy. From 21 December insurers will not be able to use this data to set premiums, which means that women can expect to see their life insurance premiums rise on policies taken out after this date. Men, in turn could see their life insurance premiums fall.

Life insurance

Life expectancy is also used to set annuity rates, and women have benefited from higher annuity rates in the past. This is expected to stop in December, and men can expect to see their annuity rates increase slightly, although annuity rates continue to fall for the time being.

Now could be the time to review your life insurance cover or consider your annuity options, please contact us to discuss.

Annuities

We can help you to decide whether this is the right option for you and your circumstances, please contact us to find out more.

Junior ISAs celebrate their one year anniversary next month, but how have they fared?

Introduced on 1 November 2011, Junior ISAs are available to children under the age of 18 who do not own a Child Trust Fund (CTF) account, which the Government abolished in January 2011. Up to £3,600 can be saved into a Junior ISA per tax year at the moment, they benefit from the same tax breaks as adult ISAs and there are both cash and stocks and shares options available. The main differences are that the child is not be able to withdraw any funds until they reach 18, and once opened friends and family can contribute to the Junior ISA.

Between launch and July 2012 72,000 Junior ISAs were opened according to HMRC, with an average subscription of £1,614. Compare this to Child Trust Funds and the results are mixed— 640,000 CTFs were opened in the 2010/11 tax year, but the average contribution was £289. Junior ISAs receive no Government contribution, and are not opened automatically, which explains why less are being opened, but it does seem that more is being saved into those that are so far.

Junior ISAs, the story so far...

We can help you to save for your children, please contact us for more information.

The way in which tax charges (or tax relief, as appropriate) are applied depends upon individual circumstances and may be subject to change in the future.FSA regulation applies to certain regulated activities, products and services, but does not necessarily apply to all tax planning activities and services.This document is solely for information purposes and nothing in this document is intended to constitute advice or a recommendation. You should not make any investment decisions based upon its content. The value of investments can fall as well as rise and you may not get back the full amount you originally invested.Whilst considerable care has been taken to ensure that the information contained within this document is accurate and up-to-date, no warranty is given as to the accuracy or completeness of any information. E & OE.

Important

Information

What does the RDR mean for you?

From 1 January 2013, instead of paying a commission on new investments, you will be asked to pay a fee, which will be explained and agreed up front.What does this mean for you?

It means that you know exactly what you are paying and that the advice you receive has not been influenced by commission.

Paying through commission may have felt like you were paying less than a fee, but in reality a fee is a visible means of payment that you agree with your adviser. This means that you make the decision, rather than the investment product provider. There are also different ways of paying the fees, speak to your adviser to find out more.

2. Clarity over the level of advice you will receiveFrom 1 January 2013 there will be just two types of advice; independent advice and restricted advice. Independent advice means that your adviser has to consider all investment products that may be right for you, while restricted advisers may focus on certain areas, such as pensions or specific product providers.

Your adviser will explain the type of advice that they offer so that you understand what it means, particularly for restricted advice. Firms that offer restricted advice are still subject to the FSA’s suitability requirements, which mean that a product must be suitable for the client’s needs.

Investment UPDATE

But what are the changes? And what do they mean for you? There are three main changes that are coming into force.

1. New ways to pay for adviceBefore the RDR many financial planners and advisers took payment for their services through commission. This meant that the company providing the investment product you invest in would have paid the adviser a percentage of the sum you invested.

However, the FSA has decided that being paid by commission could lead to some advisers being influenced by how much they could earn from an investment and investors did not know exactly how much they were paying.

From 1 January 2013, the financial planning and advice landscape will change forever. The Retail Distribution Review (RDR) is launching, as the Financial Services Authority (FSA) tries to ensure that all financial advice on offer is professional, clear, fair and transparent.

FINANCE UPDATE OCTOBER 2012

What does this mean for you?

This means that you will know what you are paying fees for. Your adviser will have to make it clear which products they can advise you on, and whether there are any restrictions. This should help you to understand more about the advice you are receiving and whether it is right for you.

3. High professional standardsFrom 1 January 2013 all advisers will need to be qualified to a new, higher level. Advisers will also need to subscribe to a code of ethics to make sure that you are treated fairly, as well as hold a Statement of Professional Standing (SPS) from an accredited body, which is evidence that they meet these new standards.

In order to ensure that advisers skills and knowledge are up to date, they will also be required to carry out at least 35 hours of continuing professional development (CPD) a year. What does this mean for you?

It means that you can be assured that the financial advice you are receiving is professional and to a high standard. You can request to see a copy of your advisers Statement of Professional Standing as evidence that they meet these new, higher, professional standards.

What does the RDR mean for you?

If you would like any information about the changes that we are making due to the RDR, just ask. We will be happy to explain our charging structure, the level of advice that we offer and why, and of course you may request to see your advisers Statement of Professional Standing.

SummaryEssentially the RDR is being launched as part of an initiative to protect consumers, particularly after the banking and financial crisis. According to the FSA, the three main initiatives are designed to establish a ‘resilient, effective and attractive retail investment market that consumers can have confidence in.’

Important information

This document is solely for information purposes and nothing in this document is intended to constitute advice or a recommendation. You should not make any investment decisions based upon its content.