Auto Enrolment Employee Booklet

Transcription

1 Auto Enrolment Employee Booklet 1

2 WELCOME TO YOUR NEW WORKPLACE PENSION As a member of Wessex Pensions, you will be joining a workplace pension scheme also used by many other employers and their staff to meet the needs of auto enrolment. If someone told you that by saving 40 per month, into a pension, the tax man and your employer would put in another 40 between them, would you think that was a good deal? Of course you would and that is exactly what auto enrolment is! If you save 4% of your salary, your employer will put in an additional 3%, with the tax man contributing a further 1%. As from 1 April 2019 the minimum total contribution to a workplace pension will be 8% of your qualifying earnings; 5% from you and 3% from your employer. You and/or your employer may want to pay in more than these minimums. That's all well and good I hear you say, but why should I do it? Will I not get a State Pension anyway? Well yes you will but, due mainly to the effects of better diet and healthcare, we as individuals can expect to live much longer and be much fitter than our parents and grandparents and want to do more in our extended retirement period. This will have the effect of making it much more difficult for future Governments to fund a reasonable state funded pension or other benefits. It is therefore important that individuals take steps to build up a retirement pot of money that will provide a higher level of financial security after they retire. It is with this background that the Government has introduced new workplace pension regulations called auto enrolment that will enable everyone to benefit in retirement from a savings arrangement that has additional payments made to it by their employer and the Government in the form of tax relief. Under these new regulations all employers have to set up a workplace pension that meets the auto enrolment regulations but there are many pension schemes available and, after considerable research and discussion, your employer has chosen a pension scheme with Wessex Pensions that will enable you to save for retirement. The scheme is formed under a Trust administered by Independent trustees, according to rules which govern your legal position. 2

3 Eligibility 1. Who can join? All employees who are over the age of 16 and under age 75 are eligible to join, and will fall into one of three categories, Eligible, Non-eligible and Entitled worker. 2. How can I join? Your employer will provide you with details of the scheme and the joining process applicable to you. If you opt-out of the scheme, you may apply to opt-in again; full details will be provided by your employer. Contributions 1. THE BASICS A workplace pension scheme is a defined contribution arrangement. This means the eventual pension you will receive in retirement will depend on the size of the pot of money you save up by the time you retire. This in turn will depend on: The total payments paid to your pension fund by you, or anyone on your behalf and your employer The investment return or growth of the funds in your pension pot The term or period of time over which your pension fund is invested The charges made by the trustees and fund managers to look after your pot of money The rules that apply to Defined Contribution pensions at the time you retire The tax rules that apply now, during and at the time you retire 2. TYPES OF CONTRIBUTION The scheme will receive regular monthly payments made by you and your employer but this may not be the case in all instances and the following types of payments can be made to the scheme: Regular monthly or annual payments normally based on a percentage of your salary, (but in exceptional circumstances may be a fixed amount in s) subject to the trustees and employer s agreement Single payments possibly from annual bonuses Transfers-in of pension plans you already own You may also contribute to your own personal pension as well as joining the company scheme, subject to the Government s maximum annual allowance and maximum lifetime allowance Payments made by anyone on your behalf 3

4 Regular Regular monthly contributions would normally be a percentage of your qualifying pensionable earnings. It may be possible to set a fixed regular amount subject to your employer s and trustees agreement and they must comply with any statutory minimum; the amount may need adjusting periodically as a result of changes to the regulations. Singles Lump sum new contributions may also be made any time, either by you or your employer or by someone on your behalf. Tax relief should be available subject to HMRC regulations. Transfers If you have a fund built up in a previous individual plan or employer s scheme, it may be possible for the value of that fund to be transferred to this scheme. However, advice should be sought as the benefits on transfer may be more, similar or could be less than those available from the transferring scheme, particularly in the case of guaranteed and protected benefits. Please seek independent advice for further information. The trustees may accept bulk transfers in from other schemes upon the employer s and previous pensions trustees direction. Who pays? If you make payments, your payments will be at the rate agreed between you and your employer but will be subject to the overall minimum amounts within the auto enrolment regulations. Your company scheme administrator will tell you what payments will be made and how they are calculated. Do bear in mind that the more that is paid into your plan, the greater the final pot will be and the greater your eventual pension benefits will be. There is an annual and lifetime maximum that can be paid into any UK pension scheme. Details are available on request. Your payments will be deducted from your salary by your employer who will then forward them directly to Wessex Pensions for investment. Wessex Pensions have chosen Old Mutual Plc to administer our funds. Established in 1845 in South Africa, it is now a FTSE 100 listed company and has more than 16 million customers and 319.4bn* assets under management. Old Mutual plc have a Fitch (ratings company) of BBB. *Dec 2014 figures. During the early phases of setting up workplace pensions the minimum contributions are quite low but, under the current auto enrolment regulations, as from 1 October 2018, the minimum contribution level must equate to 8% of qualifying earnings, of which the employer must contribute a minimum of 3%. 4

5 Investment The type of investment the money is invested in during the term of your plan is very important and the trustees will normally decide which investment choices are most appropriate. However, they may take your wishes into account in arriving at their decisions. The investments will be subject to various types of risk with the main one being capital risk. This means the value of an investment is not guaranteed and can go down as well as up and may fall below the amount(s) paid in. Membership There are two types of member in a workplace pension; active and deferred members. 1. ACTIVE MEMBERS You will be an active member from the day you join the scheme until you either: Opt-out (you will be automatically enrolled before you can opt out) Leave employment Die before drawing your benefits Transfer your funds to another registered scheme Reach your employment normal retirement date Subject to the trustees and employer s acceptance, members can remain active members for periods of absence due to illness, maternity, paternity, adoption or other definite expectation of a return to work before normal retirement age as the trustee and employer determine. 2. DEFERRED MEMBERS Deferred membership is effective from the day you leave the scheme until you either: Opt-in again Become employed again by an employer of the scheme Transfer your fund to another registered pension scheme Subject to the terms of your employment and auto enrolment provisions, it may be possible to transfer your benefits accrued to date whilst remaining in employment and thus continue Tax relief Under current UK tax regulations any payments made by an individual to an authorised and regulated pension scheme is eligible for tax relief. This is achieved by taking your contribution directly from your gross pay before the calculation of tax. This has the effect of immediately reducing your taxable income. In effect, this means that the government will pay a portion of the total fund you accumulate. Technically, payments to the scheme will be deducted from your salary before tax, which means you will immediately receive tax relief at your highest marginal rate. 5

6 Tax relief (continued) If you are a higher rate (40%) or additional rate (45%) taxpayer then you should contact your local tax office to obtain the tax relief over and above the basic rate. This can be quite confusing so please don t hesitate to refer to your payroll administrator or professional adviser for assistance or an explanation of the tax rules applicable to your circumstances. Tax Payable Because tax relief is applied when contributions are paid in and the fund itself is largely tax free, the Government charge tax on most (but not all) withdrawals. The funds your pension will be invested in are largely tax free but are unable to reclaim tax deducted at source from the dividends of UK company shares. Other investment income and all capital gains are currently free from UK tax. Currently, Inheritance Tax is also not applicable to funds that are in an authorised pension scheme. All payments paid as income either as regular payments or lump sum withdrawals from the scheme will be taxed as earned income under the PAYE system. At retirement, you can normally take up to 25% of the fund value as cash in return for a smaller taxable pension; currently this is tax-free. Tax charges may apply if the Government s Annual Allowance or Lifetime Allowance is exceeded, or if you transfer the scheme to an unauthorised scheme. The tax advantages of joining the scheme will depend on your personal circumstances. Both your circumstances and tax rules may change in the future. BENEFITS AT RETIREMENT When can I take benefits? You can normally start taking all or part of your pension at any time after the age of 55 (or 10 years before your State Pension age if later). You do not have to actually retire. What benefits can I receive? When you retire, you should have more than one option available to you to receive benefits. Currently the main options are an annuity or a drawdown pension. In addition, following the change in the budget 2015, a new flexible option became available known as Flexi Access. 6

7 Annuity The pot of money or fund built up for you under the scheme can be used to purchase a taxable pension from an annuity provider that would pay you a fixed income for life. You can also build in a spouse s pension, an increasing pension and / or a minimum period (usually 5 or 10 years) that the pension will be paid for. You are encouraged to seek independent advice at that time to see which would be the best annuity terms to meet your circumstances. The amount of the pension payments you will receive will depend on a number of factors including the size of the fund when you retire, and type of pension you choose. Those in poor health may be able to obtain enhanced terms. You can normally take up to 25% of the fund value as cash. Currently this is tax-free, and will result in a smaller taxable pension. Flexi Access / Drawdown Available since April 2015 and if your scheme allows, you can designate some or all of your pension fund for flexible access and withdraw an income from it. The remaining funds stay invested and have the potential to increase or fall in value. The money you take is treated as taxable income and based on your own individual tax position. You could also withdraw a lump sum from your pension. Usually, a maximum of 25% of the value of your fund is treated as a tax free withdrawal. The remaining will again be treated as taxable income and subject to your own individual rate of tax. In either instance, we would recommend independent financial advice is taken when accessing your pension, or to contact Pension Wise, the Government service offering free and impartial guidance. They can be contacted on or visit BENEFITS ON DEATH Death before drawing your pension An indication of the value on death will be shown in the statement of benefit. You may advise the trustees, at any time, of who you want to pay the lump sum death benefits to, although the trustees will not be bound by your nomination. Death after drawing your pension Any payment will depend on whether you have opted for an annuity or drawdown pension and the type of annuity you will have purchased. 7

8 Leaving the scheme If you leave the scheme, all payments to the scheme will normally stop. Your options will depend on the length of time that you have been a member of the scheme and these are described as below: Less than 6 weeks membership: Current auto enrolment regulations allow for a refund of your own payments less a tax charge, or You will be entitled to a deferred benefit under the scheme subject to trustee agreement, or You will be entitled to transfer the value of your fund to another registered pension scheme. More than 6 weeks membership: You will be entitled to a deferred benefit under the scheme. Alternatively, you may choose to transfer the value of your fund to another registered pension scheme. Leaving a scheme under auto enrolment rules is termed as opting-out, as described above and in detail in your information pack. You may opt-in again at any time whilst still employed by the participating employer to the scheme. Under current rules you will be re-enrolled within 3 years of opting-out. Scheme Information Each pay reference period your employer must calculate the appropriate contributions payable and will inform the scheme administrators and pay the contributions to the scheme. The trustees are required to obtain a yearly statement from the scheme auditor confirming that the payments shown in the schedules have been paid. Wessex Pensions will provide the necessary information. If you require any further information about the scheme or your benefits, or if you would like to see a copy of the rules and auditor s statement, you should contact Wessex Pensions or the trustees. Charges If you propose to make a single contribution or if you transfer funds into your workplace pension account, any charges would be outlined to you prior to your decision to proceed. Important notes Charges, limits and terms which apply may change. This brochure contains a summary of the main benefits available from the Scheme. Full terms and conditions are available on request from your employer. Reference to taxation is based on our current understanding of the rules, which may change. The level and timing of benefits are subject to legislation, which may change in the future. 8

9 Complaints If you have general queries regarding the scheme these should be raised in the first instance with your company scheme administrator. If you are unhappy with any aspect of the scheme you may approach the person nominated by the trustees to consider problems. This person should reply to your complaint within 30 days. If you are still unhappy you may appeal to the trustees. The trustees will give their decision within two months. Complaints should be addressed to; The Compliance Officer Wessex Money Ltd 17 Headlands Business Park Salisbury Road Ringwood Hampshire BH24 3PB The Pensions Advisory Service (TPAS) can assist members and beneficiaries of the scheme with any pension queries they may have. They can also assist if the issues you have experienced have not been resolved by the scheme administrator or the Trustees. They can be contacted at: The Pensions Advisory Service 11 Belgrave Road London SW1V 1RB Phone: If TPAS are unable to deal with your complaint, you can refer it to the Pensions Ombudsman: The Pensions Ombudsman 11 Belgrave Road London SW1V 1RB Phone: Wessex Money Ltd is the administrator of the Wessex Pensions Master Trust. Company registration number Pensions registration number RV 9