It’s not unreasonable to say that Automatic Enrolment has been a success with findings from the 2018 Department of Work and Pensions (DWP) evaluation report on the topic showing:

  • As at June 2018, rates of opt-out / stopping contributions into a pension after the opt-out period have remained consistent with levels before the contribution increase in April 2018. Official data from the DWP state the opt-out rate is currently at 9%. Data for 2019 is still awaited.
  • Since the start of automatic enrolment in 2012, more than 9.9 million workers have been automatically enrolled, and over 1.4 million employers have met their duties, with 591,000 workers having been automatically re-enrolled and 73,643 employers having met their re-enrolment duties.
  • Findings from the DWP’s communications tracking research found that the majority of individuals interviewed viewed automatic enrolment as a good thing for them personally (82%); agreed saving into a workplace pension was normal for them (80%); and knew where to go if they wanted to find more about workplace pensions (83%).

We all know however that the current total contribution level of 8% (employee 5%, employer 3%) is clearly not going to be enough to provide a suitable and sufficient income in retirement for most people who may well have unrealistic expectations as to what their retirement income may look like.

Opinion circulating from leading pension industry heads have suggested that by 2030, the total minimum contribution rates could rise to 12% with a 50/50 split between employer and employee. As most employees are currently paying 5%, a jump to 6% (50% of 12%) is not too hard to find however a 3% jump for employers may mean that future pay increases are restricted.

Whilst these views are positive and the hope from the industry that the above opinion may be included in a potential pension bill later this year, the key to success around understanding pensions for the average person in the street is not to keep throwing money at the subject but through communication. Although providers are making massive strides in making pensions more engaging through development of online functionality, mobile phone apps and more legible annual statements, there is still much work to be done.

Many employers contract expensive specialist services with the hope that they deal with all aspects of their pension obligations. However, we believe at Wingate that the fundamental key to dealing with pensions for the benefit of employees is to deliver communications which take the complexity out of the subject, make it engaging and then once a base level of understanding and knowledge is in place, build up the expertise.

At Wingate Benefit Solutions we have tools to help employers engage with employees, all of which are tailored to an employer and employees needs. This could include face to face group presentations to staff, one to one ‘pension clinics’, online presentations together with clear and concise engaging guides in either hard or soft format. Should you wish to discuss these options, please do not hesitate to contact us on 01883 332260 or at info@wingatebs.com .

When becoming an employer for the first time there are lots of things to consider; do you need to register as an employer with HMRC , setting up payroll, getting liability insurance and arranging contracts of employment. The last thing on your mind I expect is complying with Auto Enrolment legal duties. So what is “Auto Enrolment”? Auto Enrolment is pension legislation designed to encourage us to all make private pension provision for our retirement via a company pension scheme referred to as a Qualifying Workplace Pension (QWPS) scheme instead of relying on the state pension.

Automatic enrolment duties begin on the day the first member of staff starts working for you, not when the employee is first paid. This involves assessing staff, to see if they meet the age and earnings criteria to be automatically enrolled. If they do you’ll need to put them into a QWPS, and you and the employee will both need to pay into it. You and the employee don’t get a choice hence the term AUTO Enrolment. Although you can opt out within 30 days of membership and receive a full refund. You will also need to write to every member of staff, whether or not they meet the age and earnings criteria, to tell them how automatic enrolment applies to them.

Take a deep breath, there is some good news, you can use postponement to delay assessing who to put into a scheme and starting contributions. Assessing staff can be postponed for up to three months, which will give extra time to meet your legal duties and postpone the commencement of employer pension contributions. You do need to inform employees this is what you are doing and set up a pension scheme at the time of sending out the communications.

These duties are ongoing, including monitoring the age and earnings of existing and new staff on every payday, to see if they need to be put into a pension scheme. And every three years, you will need to re-enrol any staff who left the pension scheme but you still employ, but if they left it within the last 12 months, you can choose whether or not to re-enrol them.

I am afraid there is still more to do. You need to inform The Pension Regulator (TPR) you have met your duties by completing an online declaration of compliance within five months of the duties start date (employing first member of staff).

I expect your thinking when will I have time to do all this on top of running a business! Well the good news is that you can outsource all elements of the process to a third party such as your payroll provider, accountant or an independent financial adviser (IFA) specialising in employee benefits such as Wingate.

Wingate will be able to provide advice on how to comply with the legislation and complete the TPR online declaration as well as recommending a suitable pension provider and assisting you with the ongoing administration of the scheme. Please contact us for more information on 01883 332260 or at info@wingatebs.com

Everyone involved in the running and management of a pension scheme – employers, advisers, trustees and administrators – should understand the compliance and enforcement interventions being undertaken by The Pension Regulator (TPR), as this will help prevent any penalties being imposed. TPR’s approach is based on trying to stop problems developing in the first place by being clear about expectations, and there is a range of educational materials available from the Regulator explaining these.

 

Despite this and Auto Enrolment (AE) having been introduced over 5 years ago, thousands of employers are still not complying with their pension duties. On 13th February 2018, TPR announced that the number of employers that have met their duties passed 1 million, further confirming that AE has become the norm for UK businesses.  However, AE enforcement work is also on the rise and between October and December 2017, TPR successfully concluded nearly 32,000 civil enforcement cases – which represents a quarter of all investigations completed since AE started in 2012.

 

There are a variety of enforcement strategies, from Compliance Notices (issued when compliance is not declared on time), to spot checks and proactive drives (where an enforcement team carry out targeted investigations). The majority of employers who receive a Compliance Note go on to meet their duties, but any that don’t will receive a Fixed Penalty Notice; those who persist in not complying risk receive an Escalating Penalty Notice with statutory fines varying from £50 to £10,000 per day, dependent on the size of the employer.

 

TPR also works directly with pension providers to obtain details of schemes that have not received payment schedules or contributions. It will initially investigate what the issue is, but if an employer has made no effort to pay regular contributions, enforcement action will begin. This starts with an Unpaid Contributions Notice, which requires all backdated contributions to be paid within 28 days. With minimum pension contributions for employers and employees increasing from April 2018, employers who fail to pay in the correct amounts on time after this date won’t only receive a fine but will also have to pay back all missed contributions at the new, higher rate too!

 

December 2017 saw the first ever guilty plea in a criminal prosecution for a case of wilful non-compliance; an offence punishable with an unlimited fine in a magistrates’ court, and up to two years’ imprisonment in the Crown Court.

 

Between October and December 2017, TPR:

  • Successfully concluded 32,000 civil enforcement cases
  • Issued Compliance Notices to nearly 18,000 employers
  • Issued Fixed Penalty Notices to around 7,500 employers
  • Issued Escalating Penalty Notices to over 1,400 employers
  • Issued Unpaid Contribution Notices to over 1,300 employers

 

The message is that it is not enough for employers to simply enroll staff into a pension scheme. The correct information must be sent to the scheme provider, contributions must be paid on time for every pay period and new starters must be assessed as they join.

 

Some employers still fail to realise that AE is not an option, it is the law; those that refuse to comply could end up with a criminal record and will still have to provide their staff with the pension contributions they are due. TPR have proved that employers who fail to comply WILL be caught and WILL be penalised. This reinforces the need for pension governance for all employers, regardless of their size, to ensure continued compliance and positive responsible scheme management .

For more information on Auto Enrolment and the ongoing compliance and governance please contact us at info@wingatebs.com or 01883 332260

In December 2017, the DWP published their latest review document “Automatic Enrolment Review 2017:  Maintaining the Momentum”. This considers the success of Auto-Enrolment (AE) to date, and what changes may be required to build on that success in future years.

Government’s objectives are that it wants to continue to normalise pension saving among workers; help lower earners build resilience for retirement; support individuals (predominantly women) in multiple part-time jobs; and simplify automatic enrolment for employers.

Below is a summary of the recommendations made in the report which have these objectives at the fore:

  • Automatic enrolment duties will continue to apply to all employers
  • The intention is to lower the age criteria from 22 to 18 allowing younger people to benefit from automatic enrolment. This would bring 900,000 young people into automatic enrolment, whilst simplifying the workforce assessment for employers
  • AE contributions to be calculated from the first pound earned, rather than from a lower earnings limit (£5,876 in 2017/18) and ‘entitled workers’ category to be removed. This would bring an extra £2.6 billion into pension saving and encourage individuals in multiple jobs to opt-in to pension saving. This would also help to simplify the way workforce assessment and contribution calculations.
  • The earnings trigger for automatic enrolment to remain at £10,000 in 2018/19 but will be subject to annual review
  • The Government will implement its manifesto commitment to target interventions, including Making Tax Digital, to identify the most effective options to increase pension saving among the self-employed. Currently a proportion of the 4.8 million self-employed people are at risk of under-saving for their retirement.
  • The impact of increasing contributions will continue to be monitored and evaluated to achieve the right balance between statutory contribution rates and voluntary additional retirement savings. Recognising such changes present significant additional costs for employers and the Exchequer and significant changes for individuals, there will be consultations to explore cost mitigation and funding options.
  • Effective engagement can reinforce an individual’s saving behaviour, supporting normalisation, especially where a choice exists to opt out, stop saving or save more. The report sets out specific areas where there is scope for pension providers, advisors, employers and government to build on existing and develop new initiatives that will support individuals’ engagement with and ownership of their savings to ultimately deliver better value to them

Overall Government believes Automatic enrolment has been a success with the savings behaviour of millions having changed and workplace pension saving has become normal. They feel the review’s recommendations will build on this success and create a fairer, more robust and sustainable system for the future which balances the needs of individuals, employers and taxpayers.

Wingate’s Comment: The review’s proposals are likely to be progressed once the impact of the AE minimum contribution increases (effective from April 2018 and April 2019) is known so these can be taken as ‘work in progress’ and subject to change.  Nonetheless, they give a good indication of Government’s intention and it’s clear there is plenty more change on the horizon for employers, employees, and even the self-employed in relation to Auto Enrolment. We will continue to issue updates as matters evolve and you can of course contact our advisers on 01883 223360 or at info@wingatebs.com for updates or assistance.

Auto Enrolment minimum contributions must increase from the current minimum rates on 6 April 2018 and again on 6 April 2019. As such in order to remain a qualifying scheme, all automatic enrolment pension schemes with contribution rates below the new minimums must increase.

The minimum employer contribution rates are just that. If an employer decided to pay more than the minimum in many circumstances it will give their pension a competitive advantage over a competitor employer as the majority of employers who first set up a pension scheme from their Auto Enrolment date did so based on the minimum employer contribution rates.

Clearly planning how to incorporate this additional cost within the overall remuneration strategy and budgets is best commenced as early as possible to ensure the impact is understood by all those involved and can be managed as effectively as possible.

Definitions of pay

To recap the contributions rates can be based on various definitions of pay as follows:

Qualifying Earnings: ALL earnings between an upper and lower limit, currently £5,876 to £45,000 per annum

Set/Tier 1: Basic Salary i.e. not including bonus, overtime, commission or certain staff allowances (such as shift pay or relocation allowance).

Set/Tier 2: Basic Salary i.e. not including bonus, overtime, commission or certain staff allowances (such as shift pay or relocation allowance) as long as these equate to at least 85% of total pay. A regular check will need to be done for all staff in the scheme to ensure their basic salaries when added together equate to at least 85% of their total earnings.

Set/Tier 3: ALL earnings without any upper or lower limits

Minimum contribution rates

Qualifying Earnings and Set/Tiers 2 and 3 

Transitional Period Duration Total Minimum Contribution Employer Minimum Contribution
1 Until 5th April 2018 2% 1%
2 From 6th April 2018 5% 2%
3 From 6th April 2019 8% 3%

 Set/Tier 1 ONLY

Transitional Period Duration Total Minimum Contribution Employer Minimum Contribution
1 Until 5th April 2018 3% 2%
2 From 6th April 2018 6% 3%
3 From 6th April 2019 9% 4%

 

The increase in minimum contributions should be simple to arrange as most payroll systems have the capability to adjust the rates automatically at the right time. However it would be wise to check this with your provider as soon as possible to ensure the correct contributions will be deducted and paid over to the pension scheme from April 2018.

Employee Communication

When a member of staff was first automatically enrolled, the letter they received from you or your Pension Provider will have confirmed that contribution levels will increase over time. There are no specific additional employee communication duties relating to notification of the increases but we strongly recommend that you do inform staff well in advance of the change in order to minimise disruption and queries.

If you require any information relating to the increases to the Auto Enrolment pension contributions and/or the communication of the changes to employees please contact the team on 01883 332260 or info@wingatebs.com

Understanding your business needs

We take time to understand your business, prepare and present a workplace pension reform assessment report which includes a project timeline.

Planning and designing a compliant approach

We validate existing arrangements or recommend a suitable scheme. We will advise on the contribution structure and identify other issues such as changes to employment contracts, nature of enrolment, contribution levels and salary exchange

Implementing recommendations and employee communication

We create and project manage the implementation to ensure you meet all the regulatory requirements.

In liasion with you, we will produce a communication strategy document, which can include the following:

  • Mandatory employee letters
  • Fixed and enhanced protection notices
  • Employee awareness PowerPoint presentations, with or without audio
  • Webinar presentations
  • Onsite presentations
  • One to one meetings and/or Q&A sessions
  • Employee support via telephone or email

The new regulations, that confirmed the change of dates from which the auto enrolment minimum contribution increases need to occur, have now been passed by Parliament.

The minimum required contributions and effective dates are detailed below:

Phasing dates Qualifying Earnings Basis Tier 1 Tier 2 Tier 3
Staging Date – 5th April 2018 2% (of which 1% employer) 3% (of which 2% employer) 2% (of which 1% employer) 2% (of which 1% employer)
6th April 2018 – 5th April   2019 5% (of which 2% employer) 6% (of which 3% employer) 5% (of which 2% employer) 5% (of which 2% employer)
6th April 2019 onwards 8% (of which 3% employer) 9% (of which 4% employer) 8% (of which 3% employer) 7% (of which 3% employer)

 

For more information or advice on Auto Enrolment please contact your usual Wingate team or call / email us on:

Tel: 01883 332260

Email: info@wingatebs.com

 

This information is based on our current understanding of legislation which can change without notice.  Professional advice should always be sought prior to making any changes to your arrangements or deciding on any action in this respect.

What is it?

Automatic re-enrolment occurs every 3 years and repeats the duties you carried out on your Staging Date. You must ensure all your eligible staff who are not active members of a Qualifying Workplace Pension Scheme (QWPS) with at least the minimum levels of contributions are re-enrolled back into your scheme.

 What you must do

  • Choose a re-enrolment date which starts three months before and ends 3 months after the 3rd anniversary of your Staging Date. For example, if your original staging date was 1st January 2014 you can elect a re-enrolment date of anywhere between 1st October 2016 & 31st March 2017
  • You don’t need to inform The Pensions Regulator of your re-enrolment date
  • You must write to the eligible staff individually, within six weeks of your re-enrolment date to tell them how re-enrolment applies to them
  • You must complete a new declaration of compliance no later than 2 months after your re-enrolment date

 What you cannot do

  • Ignore it
  • Operate postponement on re-enrolment i.e. you must enrol people on your re-enrolment date.

Who you have to re-enrol

Yes: Eligible staff who more than 12 months before your chosen re-enrolment date have either:

  • Opted Out
  • ceased active membership of the QWPS or
  • stayed in your QWPS but the contributions are less than the minimum required under the QWPS rules

No: Anybody who:

  • Has Opted Out or ceased active membership within 12 months of your re-enrolment date
  • Has given in their notice to end their employment or been given notice of dismissal
  • Has Primary, Enhanced, Fixed or Individual protection from tax charges on their pensions
  • Is a Director of the employer
  • Is a Partner of the employer where it is a Limited Liability Partnership

Hopefully your payroll system will automatically highlight most if not all of these people for you but you should check this well in advance of your re-enrolment window.

Opting Out

There is a one-month window in which re-enrolled employees can opt out of the scheme.

Next Steps

If you are nearing or within 9 months of the 3rd anniversary of your Staging Date please contact your usual Wingate contact or call / email us at:

Tel:        01883 332260

Email:   info@wingatebs.com

 

This article is a basic introduction to the subject and is not meant to be exhaustive document and should be treated as such. It is based on our current understanding of legislation which can change without notice.  It is not a recommendation for changing any existing arrangements and professional advice should always be sought prior to making any changes to your arrangements or deciding on any action to be taken.

It is frightening how time is flying by…… can you believe its almost Easter ?!

It’s a similar story with Auto Enrolment. The Auto Enrolment Staging Dates for the thousands of employers with less than 50 employees are in full swing and in just over a year’s time the final category of employers, those that were established after April 2012, will begin to reach their Staging Dates.

Re-enrolment

At the same time re-enrolment time is upon the larger employers, which like the original Staging Date project needs planning for well in advance. There are a number of options for employers to choose around re-enrolment and new exempt categories of employees to consider which means it needs advanced planning and a clear employee communication strategy to ensure that everyone knows what will be happening, when and how it will be implemented.

Triennial Reviews

Re-enrolment is also seen as an ideal opportunity to review whether a workplace pension scheme has delivered value for money, particularly considering the efficiency of the contribution payment, joiner, leaver and opt out processes. Since the early years of Auto Enrolment there have been huge developments in solutions to assist employers meet their AE duties and the market is hugely competitive. It also gives employers a chance to review whether their pension scheme’s charges remain competitive, which is key to ensuring the members enjoy as much benefit from the contributions paid as possible.

Pension providers are priming themselves for the reviewing market and we are seeing them offer highly competitive terms to the right employer in an attempt to win their scheme. Its fair to say competition for higher quality schemes has never been greater as fewer of these are now available since the start of auto enrolment. Unless there have been significant service issues with the existing provider or consistently poor returns from its investment fund range n our experience employers don’t generally want to switch their pension scheme to a new provider. As such these reviews are more often used as a leverage with the existing provider to review the existing scheme’s charges to ensure it remains competitive meaning they retain the scheme.

Minimum Contribution Increase

With time seeming to fly by so quickly employers need to remember that in just over 24 months the first minimum contribution increase will be here. Depending on how far in advance an employer budget forecasts and the existing contribution levels being paid this increase may need to be factored into any budget planning sooner rather than later.

This has not only the obvious financial cost implications but it will also have a time cost in that it will need an employee communication strategy. Employers may also want to consider ways in which they can increase employee engagement on pensions to ensure they see a return on this increasing ‘investment’.

f you would like further information and advice on re-enrolment, scheme reviews, contribution changes or workplace pensions in general please contact us at:

01883 332260 or info@wingatebs.com

All statements concerning the tax treatment of products and their benefits are based on our understanding of current tax law and HM Revenue and Customs’ practice. Levels and bases of tax relief are subject to change. This is information is not provided as advice or a recommendation.