Auto enrolment. A guide for employers. Pegasus Software keeping you informed

Transcription

1 Auto enroment A guide for empoyers In future years, the number of peope in retirement wi rise, and those peope wi be caiming a pension for onger. The state may be unabe to sustain this financiay, uness peope aso make their own provisions by buiding up a pension. In an effort to ensure that peope are saving enough for their retirement, the government has introduced the Workpace Pensions Reform. Rather than eave it to individuas to seect a pension provider and make contributions into a pension, starting from October 2012, UK empoyers have a ega obigation to enro certain empoyees into a pension scheme as a matter of course and pay contributions into that scheme. This is referred to as automatic enroment. It s important for empoyers to understand the process invoved. This guide provides a brief overview.

2 Automatic enroment means that empoyers now have a ega obigation to ensure that certain empoyees are enroed into a suitabe pension scheme. Contents What is automatic enroment? 3 The key terms 3 The key steps 3 Your staging date 4 Moving your staging date 4 Postponement 4 In preparation 5 Administrative procedures 5 Payro procedures 5 Your pension scheme arrangements 6 NEST 6 Assessing your workforce 7 After the first assessment 8 Auto enroment 9 Opting in and opting out 10 After auto enroment 11 Keeping records 11 Automatic re-enroment 11 Auto enroment and your payro software 12 Appendix 13

3 3 What is automatic enroment? Automatic enroment is the process by which empoyers enro certain workers into a quaifying pension scheme as a matter of course. The worker does not have to take any action; it is the duty of the empoyer to seect an appropriate pension scheme and automaticay enro the worker into that scheme. Both the empoyer and the empoyee then make contributions into the pension scheme. Not everyone on your payro may have to be automaticay enroed. There are certain rues which set out who must be automaticay enroed and who does not have to be. Automatic enroment is aso referred to as auto enroment. In this guide, both terms are used interchangeaby. The key terms Staging date The date on which an empoyer s auto enroment duties come into force. Auto enroment is being roed out in stages to encompass empoyers over a number of years. Empoyers are being staged based on the number of peope they empoyed in Apri The process started in October 2012 with the argest empoyers and is graduay incorporating smaer ones. It wi be competed by Eigibe Jobhoder, Non-Eigibe Jobhoder, Entited Worker These are a specific terms which are used in the context of auto enroment to define an empoyer s duties towards different categories of their workforce. Auto enroment pension scheme/quaifying pension scheme The scheme which you seect to enro your eigibe jobhoders into must compy with certain criteria in order to be suitabe for use with auto enroment. The key steps Find out your staging date Estabish the necessary administrative and payro processes to enabe you to fufi your new duties Seect a suitabe pension scheme and understand the process for joining the scheme Communicate the changes to your workforce Assess your empoyees to determine what duties you have towards them Prepare the data to send to the pension provider Ensure that your payro software can support you in your new duties Visit to create your individua step-by-step auto enroment pan.

4 4 1Your staging date The starting point of your auto enroment duties is your staging date. Staging dates are based on the number of empoyees an empoyer had on their argest PAYE scheme on 1 Apri Broady speaking, empoyers are being staged as foows: Empoyers with 250 or more empoyees: between 1 October 2012 and 1 February 2014 Empoyers with 50 to 249 empoyees: between 1 Apri 2014 and 1 Apri 2015 Empoyers with fewer than 50 empoyees: between 1 June 2015 and 1 Apri 2017 New empoyers setting up business from 1 Apri 2012 up to and incuding 30 September 2017 wi have staging dates between 1 May 2017 and 1 February 2018 The Pensions Reguator is writing to empoyers to inform them of their individua staging date 12 months and again 3 months before it comes into force. To find out your staging date now, use the foowing ink and have your PAYE reference to hand: The postponement period can be any ength of time between one day and three months after your staging date. Moving your staging date It s possibe to bring your staging date forward. To do this, first you must: 1. Contact a pension scheme that can be used to compy with your auto enroment duties 2. Get confirmation that the seected scheme can be used from the new (ie earier) staging date. It s not possibe to push your staging date back, uness you meet The Pensions Reguator s definition of a sma empoyer. Modified staging dates have been set for these sma empoyers by The Pensions Reguator. If bringing your staging date forward you must notify The Pensions Reguator. This is aso recommended, though not compusory, if pushing it back. For fu detais on staging pease refer to: Postponement Auto enroment rues aow you to postpone empoyee assessment, and therefore the duties that derive from it, for up to 3 months after your staging date. You can use postponement in respect of one, some or a of your workers. If you decide to use postponement, you need to inform the workers invoved by issuing them with the appropriate Postponement Notice, of which there are four prescribed types (see Appendix). The ast day of the postponement period is caed the deferra date and it must be incuded in the Postponement Notice. You can ony use postponement for a worker on certain dates: 1. Your staging date, for workers empoyed by you on your staging date 2. The first day of empoyment, for workers starting empoyment with you after your staging date 3. The date one of your workers becomes an Eigibe Jobhoder after your staging date. For detaied information on postponement, pease refer to

5 5 2 In preparation Once you have estabished your staging date, there are steps you must take in good time in order to meet your auto enroment deadines when they arrive. Decide whether to bring your staging date forward: you may find bringing your staging date forward usefu in order to aign it with other important dates in your payro caendar. Decide whether to use postponement on your staging date: this wi determine what your duties wi be when your staging date is reached. Investigate pension schemes and seect one that can be used for automatic enroment. You then need to understand the process and timescaes for joining the scheme to ensure that you be abe to automaticay enro your workers within the timeframe required by The Pensions Reguator. Then you need to ook at setting up the administrative and payro procedures that wi aow you to compy with your new duties. Administrative procedures Prepare the information to provide to your workers regarding the new pension egisation and how it affects them: there are severa types of information that you are required by aw to provide to the different categories of worker at set times. Prepare the data to provide to the pension scheme: ensure that you hod a the empoyee data you be required to submit to the pension scheme and that you re famiiar with the process you need to foow. If you decide to use postponement: source and prepare the reevant notices that you must provide to your empoyees (see Appendix). For detais on providing information to your workers pease refer to Payro procedures You need to ensure in advance that your payro system or processes wi be abe to support you in your new duties, which wi incude the foowing: Cacuating empoyer contributions (taking into account possibe different contribution rates) and paying them into the pension scheme Cacuating empoyee contributions according to the new requirements (eg possibe different contribution rates and different components of pay the contributions are based on), making the deductions and paying them into the pension scheme Tax reief issues: you need to estabish from the pension scheme whether tax reief is to be based on net or gross pay and set up your payro accordingy.

6 6 3 Your pension scheme arrangements An essentia part of the auto enroment process is ensuring that you are using a pension scheme suitabe for auto enroment. If you aready offer a pension scheme to your workforce, you need to ensure that it s a quaifying scheme in order to continue to use it for your Eigibe Jobhoders who are aready members of the scheme. A quaifying scheme is one that meets the minimum requirements for auto enroment pus certain other quaifying criteria. If you don t aready offer a pension scheme to your workforce or if you have Eigibe Jobhoders who are not aready active members of a pension scheme, you need to put in pace an auto enroment scheme to use for auto enroment. An auto enroment scheme is one which, in addition to meeting the minimum requirements and quaifying criteria, aso: must not contain any provisions that prevent the empoyer from making arrangements to auto enro, opt in or re-enro a jobhoder, and must not require a jobhoder to make any kind of choice or provide any information in order to become or remain an active member of the scheme. A key feature of an automatic enroment scheme is that it is the empoyer s responsibiity, working with the pension scheme trustees/managers or provider, to achieve active membership for the Eigibe Jobhoder. The jobhoder must not be required to provide any information or make any kind of choice in order to either join or remain a member. For detaied information on minimum requirements, quaifying criteria and which pension schemes are suitabe for auto enroment, refer to NEST NEST (Nationa Empoyment Savings Trust) is an auto enroment pension scheme set up by Government with a pubic service obigation to accept any empoyer who wishes to use it. This is in order to ensure that a empoyers have access to a suitabe scheme to hep them compy with their auto enroment duties. To find out more about the NEST scheme visit

7 7 4 Assessing your workers for auto enroment wi be an ongoing duty. Assessing your workforce Firsty, you need to determine which of your empoyees are cassed as workers who ordinariy work in the UK under the terminoogy and rues set up specificay for auto enroment purposes. Assessment of your workers must take pace at certain times specified by The Pensions Reguator. The first of these times is your staging date. The purpose of assessment is to categorise your workers into one of the foowing, based on their age and quaifying earnings: Eigibe Jobhoder: Aged between 22 and state pension age with quaifying earnings above the Auto Enroment Threshod Non-Eigibe Jobhoder: Aged between 16 and 74, with quaifying earnings beow the Auto Enroment Threshod but above the Quaifying Earnings Lower Threshod OR, Aged between 16 and 22 or between state pension age and 74, with quaifying earnings above the Auto Enroment Threshod Entited Worker: Aged between 16 and 74 with quaifying earnings beow the Quaifying Earnings Lower Threshod In carification of the above: Auto Enroment Threshod: 9,440 for tax year 2013/14, and 10,000 for tax year 2014/15 Quaifying Earnings Lower Threshod: 5,668 for tax year 2013/14, and 5,772 for tax year 2014/15 Whist the age-reated aspect of eigibiity is straightforward, attention must be paid to the earnings-reated aspect, where each worker s pay reference period and quaifying earnings must be determined as part of the assessment. This is a compex process which your payro software package shoud be abe to hande for you by performing the necessary cacuations. It s important to note that, under auto enroment, assessing your workers for auto enroment wi be an ongoing duty. Detaied information on assessment can be found on

8 8 5 The resut of assessment determines your duties towards each of your workers. After the first assessment The category an empoyee fas under determines your duties towards them. Once you have competed the assessment, the next step is to automaticay enro, appy a postponement period or provide specific information to each of your workers, depending on the category they fa under. Broady speaking, your duties towards each category of worker are as foows: Eigibe Jobhoders Eigibe Jobhoders who are not aready members of a quaifying pension scheme: You must either automaticay enro those workers into a suitabe pension scheme, or appy postponement in respect of those workers. Eigibe Jobhoders who are aready members of a quaifying pension scheme: You must confirm to these workers that they are indeed members of a quaifying scheme and refer them to for further information. You must make contributions into the pension scheme in respect of Eigibe Jobhoders who have been auto enroed. Non-Eigibe Jobhoders Non-Eigibe Jobhoders who are not aready members of a quaifying pension scheme: You must provide these workers with prescribed information about their right to opt in to an automatic enroment scheme, ie request to become active members of an automatic enroment pension scheme. Non-Eigibe Jobhoders who are aready members of a quaifying pension scheme: You must inform these workers about their active membership of the scheme. You must make contributions into the pension scheme in respect of Non- Eigibe Jobhoders who opt in for automatic enroment. You must continue to assess Non-Eigibe Jobhoders who have not opted in to track when they might become Eigibe Jobhoders. Entited Workers Entited Workers who are not aready members of a pension scheme: You must provide these workers with prescribed information about their right to join a pension scheme. Entited Workers who are aready members of a pension scheme: If the pension scheme is not a quaifying pension scheme, you must continue to assess these workers on the first day of each pay reference period, to track when they may meet the criteria to become an Eigibe Jobhoder or Non- Eigibe Jobhoder. If an Entited Worker gives you notice that they wish to join a pension scheme you must arrange for them to become an active member of a pension scheme; pease note that the scheme does not have to be an automatic enroment scheme, or even a quaifying one, but must be UK tax-registered. You do not have to make contributions in respect of Entited Workers who join a pension scheme. For detaied information regarding your duties towards each category of worker pease refer to

9 9 6Auto enroment Empoyer contribution eves are being phased: they are at 1% unti 30/9/2017, rise to 2% between 1/10/2017 and 30/9/2018, and then to 3% from 1/10/2018. After you have carried out the assessment of your workers and you have an appropriate pension scheme in pace, your next step wi be to arrange for your Eigibe Jobhoders to become active members of the scheme on their automatic enroment date and provide the reevant information to them. Auto enroment must be competed within 6 weeks of the Eigibe Jobhoder s automatic enroment date; this period is caed the joining window. Automatic Enroment Date An Eigibe Jobhoder s Automatic Enroment Date is one of the foowing: The assessment date, for a worker identified as an Eigibe Jobhoder on the first assessment The first date that the criteria for auto enroment are met, for a worker not identified as an Eigibe Jobhoder on the first assessment The deferra date, if you chose to use postponement. An Eigibe Jobhoder s automatic enroment date is key: It s the date from which active membership of a pension scheme must start It s the start date for the cacuation of contributions to be paid into the pension scheme. Automatic enroment process Automaticay enroing your Eigibe Jobhoders invoves the foowing: Providing the jobhoder s persona information to the pension scheme Providing auto enroment information to the jobhoder Making arrangements to achieve active membership of the scheme for the jobhoder with effect from their auto enroment date Providing information The information you must provide to the Eigibe Jobhoders you have auto enroed incudes the foowing: that they have been auto enroed into a suitabe pension scheme the detais of the pension scheme into which they have been auto enroed the vaue of the contributions that wi be payabe into that scheme by the empoyer and by the empoyee that they have the right to opt out after they have been auto enroed that they have the right to opt back in after opting out You can choose to provide this information either in writing or by emai, but it must be specificay sent to each Jobhoder, ie you can t merey put up posters or refer jobhoders to an onine resource. For fu detais on the information you need to provide, the arrangements you need to make with regard to active pension scheme membership and the timescaes reating to contributions payments, see

10 10 Opting in Non-Eigibe Jobhoders have the option to request to become active members of an automatic enroment pension scheme. This is caed opting in. Entited workers can aso request to join a pension scheme. In these cases, both the empoyee and the empoyer must foow set procedures which are set out on 6.pdf. Opting out Eigibe Jobhoders who you have automaticay enroed and Non-Eigibe Jobhoders who opted in to auto enroment have the right to subsequenty request for their membership of the pension scheme to be undone. This is caed opting out. Jobhoders must opt out within a certain timescae caed the opt-out period; The opt-out period is one month after either the date the jobhoder becomes an active member of a pension scheme or the date they are given written enroment information, whichever is atest. Jobhoders opt out by submitting a vaid opt-out notice, which they must obtain directy from the pension provider; this notice shoud not be provided to jobhoders by their empoyer. You must then stop deducting contributions, inform the pension scheme that the membership must be undone and issue to the jobhoder any appicabe refunds of contributions aready made. You must keep track of Eigibe Jobhoders who opt out as you wi be required to automaticay re-enro them on their automatic re-enroment date. You must aso keep either paper or eectronic records of a opt-out notices for four years. Entited Workers who ask to join a pension scheme don t have opt-out rights. They ony have canceation rights as per the Financia Conduct Authority rues. For fu detais of opt-out timescaes, opt-out notices and contribution refunds pease refer to

11 11 7After auto enroment Other empoyer responsibiities incude: Managing the opt-in and opt-out process After you have auto enroed Eigibe Jobhoders, you must cacuate and pay your own contributions to the pension scheme, as we as cacuate, deduct and pay the jobhoders contributions in a timey manner, according to the schedue of payments required by aw. The cacuation and deduction of contributions shoud be handed by your payro software package. Continuing to assess workers who haven t been auto enroed for eigibiity Keeping records Putting jobhoders whose membership of the pension scheme has ceased back into pension saving. This is caed automatic re-enroment. Record-keeping Record-keeping requirements incude maintaining empoyee information (empoyee name, Nationa Insurance number, date of birth, earnings etc) and pension scheme information (pension scheme reference, name, address etc). Most of this wi aready be stored in your payro system. But you need to ensure that you aso keep records of opt-in/joining/opt-out notices etc. These records must be kept for six years, with the exception of those reating to optouts which must be kept for four years. Eectronic copies of the originas are acceptabe provided they are egibe. For detais of a the record-keeping requirements pease refer to Automatic re-enroment Since the main principe of auto enroment is for the empoyer to ensure their jobhoders are in pension saving, another empoyer duty is automatic reenroment of jobhoders whose membership of a pension scheme has ceased. There are two types of automatic re-enroment: Cycica: Eigibe Jobhoders who opted out or chose to cease membershipa after your staging date must be put back into an automatic enroment scheme after three years, and thereon on a three-yeary cyce. Immediate: Jobhoders whose active membership of a quaifying scheme has ceased not on their own account must be put back into an automatic enroment scheme immediatey when certain conditions are met. Pease note that postponement is not possibe at re-enroment. The process for automatic re-enroment is the same as for automatic enroment. For detais on automatic re-enroment see

12 12 8 Auto enroment and your payro software Empoyer duties under auto enroment rues are mutipe, compex and ongoing. Thankfuy, a good payro software package can ease much of the strain, and the functionaity in Opera 3 Payro, Opera II Payro wi automate and streamine many of the processes invoved. When it comes to assessing your workers, Opera 3 Payro and Opera II Payro wi perform a the necessary cacuations of empoyee age and earnings to determine what category of worker each empoyee fas under (Eigibe Jobhoder, Non-Eigibe Jobhoder etc). You can then auto enro your empoyees on a goba or on an individua basis. The faciity to postpone empoyees is aso provided. With Opera 3 Payro and Opera II Payro you can aso capture information such as whether a pension scheme is to be used for automatic enroment and whether contributions shoud be based on an empoyee's earnings between the automatic enroment threshods. Furthermore, as we as the existing pension reports that can be extracted from Opera 3 Payro or Opera II Payro, Pegasus XRL is the award-winning reporting too which wi hep you run reports on the data you hod so you can ensure that you have a the empoyee information you need to submit to your pension provider. Pegasus XRL can aso be used to extract empoyee data from the Opera 3 or Opera II payro system for use in mai merging the information etters you need to provide to your empoyees. Opera 3 offers integration with NEST and NOW: Pensions, to hep automate the process of submitting contributions to these providers. The integration component creates the necessary empoyee enroment fies and empoyee and empoyer contribution fies, ready for submission. For other pension providers, the Pegasus Soutions Marketpace offers add-on soutions for your Opera 3 or Opera II software to hep you prepare the required data for submission. And when it comes to your record-keeping duties, the Document Management appication for Opera 3 and Opera II can hep significanty. You be abe to store documents such as opt-in, opt-out and joining notices eectronicay and retrieve them quicky and easiy whenever required. For smaer businesses, Pegasus Capita God Payro hods key empoyee and payment information, creates a nominated auto enroment scheme and defines quaifying earnings and pensionabe pay, and categorises the workforce into entited workers, non-eigibe jobhoders and eigibe jobhoders. In addition, Capita God Payro aso inks to NEST Pensions and a number of other pension providers. To enquire about Opera 3 Payro and any of the other appications, pease contact us: info@pegasus.co.uk

13 13 APPENDIX FURTHER INFORMATION Further information on auto enroment for empoyers and empoyees can be found on: The Pensions Reguator: The Nationa Association of Pension Funds: The Pensions Advisory Service: For pension providers offering pension schemes for auto enroment, visit: Association of British Insurers: RESOURCES Here are some resources that The Pensions Reguator has compied to hep empoyers with providing information to their workers. Letter tempates for providing information to empoyees Letter tempate for Eigibe Jobhoders who are aready members of a quaifying pension scheme: Letter tempate for Non-Eigibe Jobhoders where you are not using postponement: Letter tempate for Entited Workers who are not members of a pension scheme where you are not using postponement: Notices for postponement Genera Notice A: Genera Notice A is issued to any worker irrespective of worker category and whether or not they are a member of a quaifying scheme with that empoyer. Genera Notice B: Genera Notice B is ony issued to a worker or workers who are not active members of a quaifying scheme with that empoyer. It s the same as Genera Notice A but excudes the information for jobhoders who are active members of a quaifying scheme with that empoyer. Taiored Notice for Non-Eigibe Jobhoders: Taiored Notices for Jobhoders contain information specific to jobhoders who are not active members of a quaifying scheme with that empoyer. The above tempate can be adapted to use for Eigibe Jobhoders or where you have ony identified Jobhoder status. Taiored notice for an Entited Worker: Contains information specific to an Entited Worker who is not an active member of a quaifying scheme with that empoyer. Pegasus Software Orion House, Orion Way, Kettering NN15 6PE T: +44 (0) F: +44 (0) E: info@pegasus.co.uk Pegasus Software is a trading name of Infor (United Kingdom) Limited. Registered office: The Phoenix Buiding, Centra Bouevard, Bythe Vaey Park, Soihu, West Midands, B90 8BG. Registered in Engand No The information contained in this guide is intended for genera guidance ony and is correct as at January 2014.