Getting ready for pension auto-enrolmentFor use by employers and pension professionals only

Content▶ What is auto-enrolment▶ Key Facts about auto-enrolment▶ Benefits of auto-enrolment▶ Auto-enrolment timeline▶ How do I know who to enrol?▶ What are the costs?▶ Postponement periods – how they work?▶ Regulatory Communications▶ Jargon Buster▶ Standard Life’s auto-enrolment solution

The pension scheme needs to meet the

requirements set out by the Pensions Regulator (tPR)

Each company has a staging date which is provided by the Pensions

Regulator, the staging date is the date in which the employer must start

complying with their duties

It brings a new range of duties

and responsibilities for all employers

in the UK

Auto-enrolment is designed to

help people save for their

retirement

Auto-enrolment

A qualifying workplace pension scheme (QWPS) which is suitable for auto-enrolment is a pension scheme that meets the Government’s minimum standards. Listed below are some of the key features of a QWPS scheme.

Auto-enrolment workplace pensions

1. Employers must auto-enrol their workers into a workplace pension if they meet the eligibility criteria

2. Employees that are auto-enrolled or opt into the pension scheme must be given opt out rights but can only opt out in the calendar month after joining.

3. Employers will have to pay at least a minimum pension contribution based on the legislative definition of pensionable earnings.

4. The scheme must have a default investment option in place for employees that don’t want to make an active investment choice

5. Employers will have to provide information to all staff about the QWPS scheme

6. Employers must make a declaration of compliance to the Pension Regulator (tPR) within 5 months of their staging date.

Factor How can you help?

How investments perform Make sure the scheme you choose has a robust default fund. It also helps if the scheme offers a range of other investments to give employees more to choice in order to fit their needs.

How much is contributed Choose a scheme that will offer employees a good quality of information, guidance and tools to help them work out how much they need to invest to meet their goals – it’s amazing how small changes now can make a huge difference in the future.

The choices made at retirement

Since 6th April 2015 people have much more choice when it comes to taking their retirement savings. You need to consider if the provider is able to facilitate these choices and will they be able to provide the right guidance and support required by employees when they need to make these decisions.

▶ The workplace pension scheme you provide will be a significant part of your employee’s remuneration package and a significant new cost for your business.

▶ Providing a good quality scheme that your employees can see real value in will help you to recruit, retain and motivate staff – therefore turning the scheme into an asset for your business.

▶ There are three main factors that affect what employees can get back from their pension when they retire:

Benefits of auto-enrolment

Timeline

Not all of your employees will be eligible to join your workplace pension scheme. It will depend on their age, how much they are paid and if they already have a pension that you contribute to.

Employee Category Action required

Existing members Employees already in the scheme on a qualifying basis (paying at least minimum contributions)

No joining action required

Eligible jobholders Earning at least £833 a month (£192 a week) and aged 22 – state pension age

Employers need to automatically enrol these employees into a qualifying workplace pension scheme

Non-eligible jobholders Earning between £486 and £833 a month (£112 and £192 a week) and aged 16 and 22 or state pension age and 74.

Aren’t eligible for auto-enrolment.However, they can choose to opt in to the QWPS and the employer must contribute for them

Entitled workers Earning less than £486 a month (£112 a week) and aged between 16 – 74

Are ‘entitled’ to join a pension scheme but employers don’t have to contribute into it for them

How do I know who to enrol?

Figures correct as at 2015/16 tax year

 

 

Payment phasing period

  

Employer

  

Total (gross) Employer

  

Total (gross) Employer

  

Total (gross) Employer

  

Total (gross)

 

Up to

Sep 2017

 2%

  3% 1%

  2% 1%

 2% 1%

 2%

 

Oct 2017 - Sep 2018

 3%

  6% 2%

  5% 2%

 5% 2%

 5%

 

Oct 2018 onwards

 4%

  9% 3%

  8% 3%

 7% 3%

 8%

The Pensions Regulator sets the minimum contributions levels that employers need to meet. These are being phased in, the full rates won’t apply until October 2018.

What are the costs?

Option 1Pensionable pay is at

least equal to basic pay

Option 2Pensionable pay is at

least equal to basic pay and 85% of total pay

Option 3Total pay is pensionable

Option 4 Qualifying band earnings

Why are postponement periods useful?

Stagger enrolment of a large workforce

Align pension joining dates,

and/or the opt out period with their payroll process

Staggers the impact of staging

by enrolling different groups of

workers over a three month period

▶ Postponement periods or waiting periods as they are also known can allow an employer to delay some of their auto-enrolment duties.

▶ Postponement periods can be used for a period of up to three months and this can help the employer to make the pension scheme fit their way of working.

▶ Employees still have the right to opt in even during the postponement period.

▶ Even if there is a postponement period in place, assessments still need to be carried out each month from staging and on the last day of postponement, which is crucial to establish if an employee needs to be automatically enrolled.

Postponement periods

Avoid joining temporary workers

By law, all employersare obliged to tell

their employees how pension reformwill affect them

Workers subject to postponement of

automatic enrolment need to be given key

information such as the end date and their rights

to opt in

Communications

Non-eligiblejobholders and entitled

workers must be provided with information telling them about their right

to opt in or join the scheme

On staging, the employer may want

to communicate with those

employees who are already a member

of the QWPS

Eligible job holders who are being automatically enrolled, must be provided with information about their

enrolment, what it means for them including

contributions and their right to opt out

Jargon Buster

Postponement date – is the date when

employers must assess the employees after

postponement has been applied to, and

automatically join them if they’re eligible

Eligible job holders – a worker who is aged between 22 and state pension age and has qualifying earnings above the earnings

trigger for AE

Entitled worker – a worker who is aged

between 16 and 74 and does not have earnings above the LEL. These employees are

entitled to join a pension scheme, but employer

payments are optional.

Pensionable earnings –definition of a persons

earnings used in pension contribution calculations. This

will vary according to the rules of the scheme but

usually includes basic salary and may not include, for

example, bonuses or commission.

Declaration of compliance– Within five months of their

staging date, employers must register their QWPS with the tPR. To do this, you need to provide certain information about the scheme and how they’re meeting their duties.

Triennial review date – At the triennial review you

have a duty to assess employees who have opted out or ended their qualifying

membership in the three years since your staging date (or since your last

triennial review).

Basic Pay – is the amount

of salary paid to employees before any

additional benefits such as overtime

or bonus.

Default Investment Option - under auto enrolment rules,

employees don’t have to make an active investment choice. Every QWPS that

accepts new members needs to offer a suitable option that employees’ contributions can automatically be invested in.

Jargon Buster

Non-eligible jobholders – a worker who is aged between16 and 21 or state pension age and 74 and has earnings below

the LEL. These employees aren’t eligible for auto-enrolment,

however they can choose to opt in to a QWPS and receive

employer payments.

Pay reference period – is the period over which an employee is paid, such as

weekly or monthly. For example, if an employee is paid

for the work they do between 28th of one month and 27th of the following, then the first day of their pay reference period

would be the 28th.

Opt out – employees have one calendar month from the date that they are

joined to the scheme to decide if they want to opt

out. Employers have a duty to deal with valid opt outs.

Opt in’s– Employees who

are aged between 16 -21 and SPA – 74 and earn

over the AE trigger can opt in.– Anyone between 16-74 that earns

above the LEL but below the AE trigger may also opt-in.

– Employees can also request to opt in during the

postponement period.

Contract Joining – If eligible employees aren’t

already in a QWPS, employers must automatically include them in one. The contract of employment approach

involves joining employees to the pension scheme as part of their contract

of employment regardless of eligibility.

Regulatory Communications –

By law, all employers are obliged to tell their employees how auto-enrolment will affect them. This means they need to send certain communications to

their employees within the timescales set out by tPR.

Lower Earnings Limit (LEL) –

The current LEL for 2015/16 is £5,824.

Auto-enrolment Trigger (AE) – The current AE

trigger for 2015/16 is £10,000.

▶ Auto-enrolment is complex so Standard Life have designed what we feel is the best and easiest solution to providing you with a quick, understandable and fully compliant new workplace pension scheme.

▶ Standard Life won the Best Group Pension Provider award in 2015.

▶ Standard Life recently removed the entrance criteria, opening it up to all employers no matter what size helping to meet the needs of over 1 million small and medium sized employers who are expected to stage over the next two years. For employers with more than 75 employees conditions will apply.

▶ If you want to find out more visit our Good to Go website to understand how our auto-enrolment solution could help you- www.goodtogopensions.com

Standard Life Assurance Limited is registered in Scotland (SC286833) at Standard Life House, 30 Lothian Road, Edinburgh EH1 2DH.

Standard Life Assurance Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority.

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