Automatic Enrolment webinar - Systems & Schemes. Welcome. 26th September 2013

Transcription

1 Automatic webinar - Systems & Schemes Welcome 26th September 2013

2 Scope of the webinar Introduction Your pension arrangements Your payroll & IT systems The questions you might need to ask to ensure these systems work together Who will be involved and what will be their role

3 Overview of legal duties & employee safeguards Automatic legislation give employers a duty to: Automatically enrol all Eligible Jobholders Communicate to workers providing timely and appropriate information Allow Non Eligible Jobholders to Opt-in and Entitled Workers to Join Facilitate Opt Outs within the opt out period and promptly refund contributions Complete registration with The Pensions Regulator Keep records Maintain contributions Automatically re-enrol all eligible jobholders every three years The Employee Safeguards state that employers: Must not induce workers to opt out or cease membership of a scheme Must not indicate to a potential jobholder that their decision to opt out will affect the outcome of the recruitment process

4 Staging profile (volumes of employers & workers) ERSP Staging Profile set 19 January 2012, forecast on 1 April 2012 data Number of staff employed Employees Average of 10,000 medium size employers staging each month in April, May & July 2014 Number of employers Employers per stage Mar-18 Dec-17 Sep-17 Jun-17 Mar-17 Dec-16 Sep-16 Jun-16 Mar-16 Dec-15 Sep-15 Jun-15 Mar-15 Dec-14 Sep-14 Jun-14 Mar-14 Dec-13 Sep-13 Jun-13 Mar-13 Dec-12 Sep-12 DM v1athis presentation remains the property Total of The employers Pensions required Regulator. to complete The content registration of these slides should not Employees be altered to in be any assessed way. ('000s)

5 Automatic webinar - Systems & Schemes Payroll & IT systems

6 No statutory duty to enrol Yes Are they an Active Member of a Qualifying Scheme? No No Are they excluded from Assessment? Yes No statutory duty to enrol Not an eligible jobholder No Total QE paid in PRP > earnings trigger? STEP 1 Assessment Date No Aged between 22 and SPA? Not an eligible jobholder New Assessment Date = 1 st day of next PRP Yes Yes Yes 22 nd Birthday in this PRP?? In Step 1, given the Assessment Date, determine if the person needs to be automatically enrolled under the legislation: STEP 2 New Assessment Date = 22nd Birthday No If you can answer the question in any ONE of the diamond boxes to reach a yellow lozenge, then the person does not have to be automatically enrolled under the legislation (yet). Otherwise, if you have answered all possible questions, proceed to Step 2. Automatic DM v1a The content of these slides should not be altered in any way. New Assessment Date = 1st day of next PRP A person would be excluded if they: are not a UK worker; or are under 16 or aged 75 or over; or do not need to be assessed yet (e.g. subject to Postponement, Transitional Period or only need to be assessed on Re-enrolment dates). SPA State Pension Age QE Qualifying Earnings PRP Pay Reference Period

7 In Step 2, the employer needs to carry out automatic enrolment. The deadline for all activities is one month from the Assessment Date, but the employee contributions need to be taken on the first payday on or after the Assessment Date. Pension scheme contributions will be calculated based on scheme rules and dated from the Assessment Date to the end of the Pay Reference Period (PRP) STEP 1 Assessment Date Issue enrolment letter to eligible jobholder STEP 2 Automatic Employee contributions deducted from first pay Scheme administrator sets up Active Membership / sends scheme T&Cs DM v1a The content of these slides should not be altered in any way.

8 No statutory duty to enrol Yes Are they an Active Member of a Qualifying Scheme? No No Are they excluded from Assessment? Yes No statutory duty to enrol Not an eligible jobholder No Total QE paid in PRP > earnings trigger? STEP 1 Assessment Date No Aged between 22 and SPA? Not an eligible jobholder New Assessment Date = 1 st day of next PRP Yes Yes 22 nd Birthday in this PRP?? New Assessment Date = 22nd Birthday No Issue enrolment letter to eligible jobholder STEP 2 Automatic New Assessment Date = 1st day of next PRP Employee contributions deducted from first pay Scheme administrator sets up Active Membership / sends scheme T&Cs DM v1a The content of these slides should not be altered in any way.

9 AE process Payroll data Assess Assessment results letter to worker Payment Run Payroll Automatic Process Enrol Payroll instructions Calculate Deduction DM v1a The content of these slides should not be altered in any way. Pension Scheme Rules instructions to pension provider

10 AE process Payroll data Assess Assessment results letter to worker Payment Run Payroll Some payroll software systems can do the assessment and calculate contributions. Automatic Process Enrol Payroll instructions Calculate Deduction DM v1a The content of these slides should not be altered in any way. Pension Scheme Rules instructions to pension provider

11 AE process Payroll data Assess Assessment results letter to worker Payment Payroll instructions Run Payroll Automatic Process Alternatively, assessment and contribution calculations may be done by non-payroll software ( middleware ) Calculate Deduction DM v1a The content of these slides should not be altered in any way. Enrol Pension Scheme Rules instructions to pension provider

12 AE process Payroll data Assess Assessment results Payment Run Payroll Middleware, in addition to doing the assessment and contribution calculations, may also handle communications Automatic Process with your pensions scheme(s) and issue letters to workers. Enrol letter to worker Payroll instructions Calculate Deduction Some pension scheme providers may offer middleware assessment services. DM v1a The content of these slides should not be altered in any way. Pension Scheme Rules instructions to pension provider

13 AE process Payroll data Assess Assessment results letter to worker Payment Payroll instructions Run Payroll However, some middleware Automatic systems may do the assessment Process and communications, but expect the employer to calculate contributions Calculate Deduction DM v1a The content of these slides should not be altered in any way. Enrol Pension Scheme Rules instructions to pension provider

14 Scenario Postponement to the last day of PRP Monthly Pay Reference Period (PRP) Assessment Day Key: C Payroll cutoff R Payroll run P Payday 1 st 30 th 1 st 31 st 1 st 30 th April May June 28 th 28 th 28 th C R P0 C R P1 C R P2 Scenario after Postponement Pay Reference Period (PRP) runs from 1 st to last day of each month; Assessment date on 31 st May is the last day of the Pay Reference Period and is after the May payday on 28th; Total Qualifying Earnings will already be known. If the worker needs to be automatically enrolled: First deduction needs to made in the next payday - P2 on 28 th June; Opt Out window will start before first deduction taken; Contribution based on 100% of June pensionable pay + 1/31 of May pay Total QE paid in PRP > earnings trigger? Yes Are they an Eligible Jobholder? Yes No No No statutory duty to enrol Opt Out window starts Automatic triggered Issue letter to worker & set up Active Membership DM v1a The content of these slides should not be altered in any way.

15 Questions to consider In practice, employers will almost certainly need some software automation. Do you intend to use your payroll software to assess your workers? Can your payroll provider provide this assessment on your product & version? Or would you need to upgrade your payroll system to do this? Or, are you going to get another supplier to carry out the assessments (e.g. pension scheme provider or other non-payroll / middleware provider)? Will all of the software do what you need it to do? How will you automate staff communications (e.g. a mail merge software tool)? Can your IT / computer systems cope, if you need to run additional software? Where is your data stored (e.g. on an integrated HR/payroll system or separately)? How accurate and up to date is your employee data (e.g. NI, address, etc)? How will these systems work together what data standards do they support? Talk to your existing providers and any possible new suppliers about this, well in advance of your staging date.

16 Questions to ask suppliers Does the system support the following: Communications with workers (e.g. does it generate/issue letters or just produce a list of workers that need letters)? Does it calculate pension contributions and for what definitions of pensionable pay? Can the software calculate less than a whole period pension contribution (e.g. calculate a pro-rata contribution if a worker is enrolled into the scheme mid-way through the PRP they may be turning 22 years old)? Can the software calculate more than a whole period pension contribution (e.g. can you use Postponement to the last day of the PRP)? What flexibility is there - configuring different Postponement rules for various scenarios? What data standards are supported / what pension schemes can it connect with? For middleware assessment software only: What payroll systems will it support (e.g. data formats used for input & output)? If you have more than one AE scheme and will use a pension provider s middleware : Will the software assess workers who would be enrolled into another provider s pension scheme, if they triggered automatic enrolment?

17 Planning timeline May 2014 Your registration deadline? 02 Sep

18 Who is responsible - develop a plan To ensure they can comply with their duties, employers are likely to have to consider: HR issues (e.g. employment & non-employee contracts, employee data accuracy, employee benefits policies, new joiner processes, staff communications, etc); Pensions issues (e.g. impact on existing pensions schemes & their members, whether to use an existing scheme or a new scheme for automatic enrolment, etc); Payroll issues (e.g. pay cycles, payroll cut-offs, payroll data accuracy, refunds, contribution calculations, processes which span tax years, etc); Information Technology (IT) issues: (e.g. computer systems, reliability & networking issues, data standards to allow different software/systems to work together, etc); Procurement issues: (e.g. any plans to buy new IT systems/software or pensions schemes or upgrade/change existing systems/software, etc); Financial issues: (e.g. forecasting and budgeting for any impact on costs, etc). Employers should make sure they involve the right people in their own organisation and in all their suppliers (or potential suppliers).

19 Automatic webinar - Systems & Schemes Pension Schemes

20 Pension schemes types Pension schemes can be either: Defined Contribution (DC) e.g. money purchase Defined Benefit (DB) e.g. Final Salary or Career Average Hybrid a mix of DB and DC An Automatic enrolment scheme must be used for: the automatic enrolment of Eligible Jobholders; the enrolment of any Jobholders who Opt In. Qualifying schemes If an existing scheme is not a Qualifying Scheme : Scheme members would need to be automatically enrolled into an Automatic scheme, if they are Eligible Jobholders. Employers may want to change the contributions levels and/or scheme rules of their existing schemes to make them qualifying.

21 What pension schemes can be used? Must be used for automatic enrolment and Opt Ins Automatic Scheme Qualifying Scheme Workers already active members of a Qualifying Scheme do not need to be automatically enrolled Employers will need to contribute to the pension scheme Scheme for Entitled Workers scheme is registered must be tax registered; and meet minimum criteria must be registered in the UK or EEA must have no barrier to automatic enrolment must be a Qualifying Scheme Employers are not required to make an employer contribution Employers may also use a Qualifying Scheme or an Automatic Scheme for Entitled Workers European Economic Area states

22 DC Scheme Minimum Contributions Phase 1 Phase 2 Phase 3 * % of Qualifying Earnings Minimum DC 2% total contribution* Minimum DC 1% employer contribution* Min DC 5% total* Min DC 2% employer* Min DC 8% total* Min DC 3% employer* Large employers Medium employers Small/micro employers New born Employers Oct 2012 April 2014 June 2015 May 2017 Oct 2017 Feb 2018 Oct 2018

23 Review your pensions Employers should consider what they need to do about their pension schemes. For your existing pensions scheme (if you have one): Are there any existing active members (e.g. members currently contributing)? Could any of the existing members be (or become) Eligible Jobholders? Does the scheme satisfy the minimum criteria? See: Do you want to use this scheme as an automatic enrolment scheme? your existing scheme provider may not allow it be made an automatic enrolment scheme (e.g. the scheme provider needs to issue Opt Out forms). If you need to or want to use a new scheme for automatic enrolment: How will you choose the scheme provider, scheme and default fund? See: Some scheme providers may not wish to offer you a pension scheme. Providers may be at full capacity or have long waiting times. NEST are obliged to offer you a pension scheme... but don t leave it too late!

24 Choosing a good quality scheme Communications The scheme provider should regularly send good quality communications to members Pension Provider The skills, knowledge and processes of those running your pension scheme are vital. Scheme simplicity Workers should be able to understand the scheme (but if they don t make any decisions they are still protected). What makes a good quality scheme? Value for money Are the costs and charges competitive and good value for the services provided Investment options Is the default investment strategy suitable? Managing Investments Know who is responsible for monitoring these default strategies.

25 Useful Links Main steps to prepare for automatic enrolment Detailed guides for Employers (and pension professionals): Planning for Automatic What information do employers need to provide to their workers? Letter templates for employers: Information about Registration and employer checklist: Logo for Automatic ( 3 coins ): (choose I only require automatic enrolment assets ) Detailed guides for Software Developers: DM v1a This presentation remains the property of The Pensions Regulator. The content of these slides should not be altered in any way

26 Webinar - Software & Schemes Questions? Please input your questions now DM v1athis presentation remains the property of The Pensions Regulator. The content of these slides should not be altered in any way

27 Webinar - Software & Schemes Close We are here to help! Contact us at Subscribe to our news by Connect with us on LinkedIn Follow us on Twitter View the TPR webinar on payroll processes (with slides) DM v1athis presentation remains the property of The Pensions Regulator. The content of these slides should not be altered in any way