8 Steps to Auto Enrolment
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We list our 8 steps to complying with Auto Enrolment in our detailed yet simple presentation. If you'd like any more Auto Enrolment information then you can check us out at www.employee-benefit-consultants.co.uk/auto-enrolment/
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8 Steps to Auto Enrolment
- 1. 8 Steps to Auto Enrolment
- 2. 8 Steps to Auto Enrolment success 1. Identifying your staging date 2. Planning 3. Opening a dialogue with your payroll provider 4. Cleansing your data 5. Assessing your workforce 6. Budgeting 7. Assessing your pension provider 8. Quality adviser support
- 3. 1. Identifying your staging date • The staging date is your deadline for auto enrolment • Based on your payroll size as of April 2012 • Check your staging date with your PAYE reference on TPR’s website: # Employees Staging Date 90 or more 1st May 2014 62 to 89 1st July 2014 61 1st August 2014 60 1st October 2014 59 1st November 2014 58 1st January 2015 54 to 57 1st March 2015 50 to 53 1st April 2015 49 or below 1st June 2015 to 1st April 2017http://www.thepensionsregulator.g ov.uk/employers/tools/staging- date.aspx
- 4. A note about postponing… • Staging date can be postponed for up to 3 months • Employers may set different postponement periods for different staff categories • A postponement notice must be issued within 1 month of staging date – or sooner • Employees can still “opt in” during a postponement period
- 5. 2. Planning Early planning is vital… AE Project Finance Payroll 3rd Party Advisers HR
- 6. Collate data from employer. Identify HR / payroll processes, pay reference periods. Check contracts of employment (legal input?). Review existing pension arrangements. Nominate key roles and responsibilities. Can your business software support Automatic enrolment? Decide on Auto Enrolment Software . Decide on Auto Enrolment Scheme. Establish contribution costs, Salary Exchange included? Identify any changes to current HR/payroll processes. Data cleansing. Agree employee communications. Consult with staff re any changes to T&Cs. Detail project plan. Agree postponement period. Start employee communications Building and testing of Auto Enrolment Software. Implementation of agreed strategy, working with Auto Enrolment Software provider in parallel with payroll processes. Implement postponement and opt- out processes. Employee assessment. Communications to all types of worker. Process opt-outs, manage refunds, process opt-ins, monthly reports to providers. Register scheme with TPR. Ongoing compliance & record keeping, re-enrolment processes. Monitor ages and earnings , assess new starters. Planning 24m-12m Strategy 11m-7m Design 6m-4m Implementation 3m-1m Staging date and Ongoing Suggested timeframes
- 7. 3. Opening a dialogue with your payroll provider • Payroll must be compatible with auto enrolment requirements • Ideally, your payroll system should have an automated exchange of data with your pension system Middleware
- 8. Each employee will require between 32 and 36 fields of data depending on which pension provider you work with That’s a lot of data, so it’s important to begin dialogue with your payroll provider now to work out what data you should be collecting
- 9. 4. Cleansing your data • Often ignored but crucial • Employee data must be complete, validated and up to date
- 10. Employee information TPR may request • Names • Dates of birth • Gross qualifying earnings • NI numbers • Contributions paid • Employee’s auto enrolment date • Pension(s) scheme information
- 11. 5. Assessing your workforce Proposed 2014/15 Employee Categories AGE <£5,772 £5,772 - £10,000 £10,000 - £41,865 16-21 Entitled Worker Non-Eligible Jobholder Non-Eligible Jobholder 22-SPA* Entitled Worker Non-Eligible Jobholder Eligible Jobholder SPA*-75 Entitled Worker Non-Eligible Jobholder Non-Eligible Jobholder *State Pension Age
- 12. Eligible Jobholders MUST be auto enrolled, but can then opt out if they wish • Early opt outs are not allowed - employees must be enrolled before opting out • If an incomplete or incorrect opt out is completed, an extra 2 weeks is sometimes given to complete opt out Opting Out
- 13. Opting In • Employees not eligible to be automatically enrolled may opt in • Eligible jobholders may opt in during any postponement/transitional stage • Non-eligible jobholders may opt in at any point • Entitled workers may request to join (no obligation on employer to contribute)
- 14. 6. Budgeting Auto Enrolment costs Pension contributions – phasing over next 4 years, dependent on definition of earnings Administration
- 15. Definitions of earnings under Auto Enrolment Definition of earnings Tier 1 Basic salary Tier 2 Basic salary, as long as pensionable pay constitutes 85% of total earnings Tier 3 Full P60 earnings Qualifying Earnings Basic salary, bonuses, overtime, commission, sick pay, maternity leave, adoption pay
- 16. Phasing of Auto Enrolment contributions Statutory basis Tier 1 Tier 2 Tier 3 Earnings definition Qualifying earnings Basic salary Basic salary, as long as pensionable pay constitutes 85% of total earnings Full P60 earnings Oct 2012 to Oct 2017 2% (of which 1% employer) 3% (2%) 2% (1%) 2% (1%) Oct 2017 to Oct 2018 5% (2%) 6% (3%) 5% (2%) 5% (2%) Oct 2018 onwards 8% (3%) 9% (4%) 8% (3%) 7% (3%) Key: Total contribution % in black (employer contribution % in blue)
- 17. Cost of administration Auto enrolment is surprisingly resource-intensive Activity Estimated time required Designing communications Up to 5 days Liaising with payroll provider Up to 6 days Worker assessment and categorisation Up to 5 days Processing opt outs and opt ins Up to 6 days Development of pension plan Up to 20 days Total to implement auto enrolment Up to 103 days Ongoing administration, per month Up to 3.5 days Source: Creative Auto Enrolment
- 18. 7. Assessing your pensions provider • Your current provider may NOT be able to support auto enrolment • 3 providers offer dedicated auto enrolment solutions: National Employment Savings Trust (NEST) NOW: Pensions The People’s Pension
- 19. National Employment Savings Trust (NEST) • UK government backed pension scheme • Charges 0.3% a year + 1.8% on contributions • Employees can carry on contributing to a NEST pension after leaving job • Limit on contributions levels • Savings can't be transferred from other schemes - until 2017 • Sharia compliant
- 20. NOW: Pensions • Based on a Danish government scheme • Charges 0.3% a year + £1.50 per month administration • No investment choice, single investment strategy • Employees cannot carry on contributing after leaving job • Higher limit on contributions • Transfers to other pensions possible at no charge • Sharia compliant
- 21. The People’s Pension • Not-for-profit organisation • Single charge 0.5% a year • Investment choice based on 3 different profiles • Employees can carry on contributing after leaving job • Transfers to other pensions possible at no charge • Sharia and ethical compliant
- 22. 8. Quality adviser support Having a good adviser will make the whole Auto Enrolment process simpler. Here’s what some of our past clients say about the advantages of working with Davidson Asset Management for Auto Enrolment…
- 26. Bonus step: Effective communication 11 quick tips: 1. Timing is everything 7. Q&A leaflets 2. Messages in payslips 8. Letters with payslips 3. Staff briefings 9. Workshops 4. Cascade information down the line 10. Think about foreign languages 5. Short videos 11. Staging date letter 6. Be different
- 27. In summary… • When does my scheme need to be in place? • Who do I have to enrol into the scheme? • How much is it going to cost? • What are my options in terms of providing a qualifying scheme? • What can I do to fund more efficiently? • What systems do I need for auto enrolment administration?
- 28. Contact DAM for further information Davidson Asset Management Limited is authorised and regulated by the Financial Conduct Authority www.employee-benefit-consultants.co.uk www.facebook.com/DavidsonAssetManagement @Russell_DAM russell.davidson@davidsonasset.co.uk www.linkedin.com/company/davidson-asset-management
Notas do Editor
- It is vitally important to start planning early and to begin preparing your various departments for the extra workload It may be possible to complete the extra work Auto Enrolment will bring in house, but you should plan ahead - for many businesses, this is simply not viable Involve HR, Payroll, Finance and third party advisers like Davidson Asset Management from as early a stage as possible
- Most employers do not want to review their payroll provider, but this may be necessary. For a robust Auto Enrolment process, your payroll system needs to have an automated exchange of data with your pension system You may hear people using the term “middleware”. This is the term for a piece of software that links payroll and HR systems to the Pension Administration System Who is the best person to ask about integrating your payroll with your pension system? Your payroll provider! You likely won’t be the first business to ask them about Auto Enrolment and they may already have a solution, so ask them.
- The People’s Pension requires you to have exactly 34 fields of data
- This is one of the most important, yet often ignored steps of the process It is essential that all data on your employees is cleansed and up-to-date It is better to assess this data now, rather than at the last minute when deadlines are approaching and emails are bouncing or calls ringing out
- Now is also a good time to start collecting data as you may be asked by The Pensions Regulator for records at any time Names Dates of Birth Gross qualifying earnings National Insurance Numbers Amounts of contributions paid Dates workers become auto enrolled Pensions scheme information
- RUSSELL – talk the people through the different categories ie eligible, non-eligible, entitled When it comes to Auto Enrolment, there are 3 different categories of workers and 4 different ways of calculating them You can begin assessing your workers at any point. Even if postponing, you can begin this step
- There are several ways in which Auto Enrolment can cost money. It is important, therefore, to budget for this. Businesses should budget for their pension contributions and for administration costs. Opt out rates so far have been 9% on average, so don’t budget expecting that most workers will opt out
- Tier 1: Using the Basic Salary Tier 2: Using Basic Salaries, as long as pensionable pay constitutes 85% of total earnings Tier 3: Full P60 Earnings Qualifying Earnings (This is made up of basic salary, bonuses, overtime, commission, sick pay, maternity leave, adoption pay)
- For example, Creative Auto Enrolment’s data suggests it will take up to 5 days to construct the necessary communications It can take up to 6 staff days to liaise with the payroll provider It can take up to 5 days to assess workers and classify them into categories It can take up to 6 days to process opt outs and opt ins It can take up to 20 days to develop a pension plan
- You may assume that your current pensions provider will be fit for purpose, but this should be checked as many businesses are finding that their current provider isn’t able to help There are 3 main pensions providers: National Employment Savings Trust (NEST) NOW: Pensions The People’s Pension Selecting a pensions provider is one of the most important parts of the Auto Enrolment process. Some businesses which have already auto enrolled are now looking to change their provider after rushing into a decision Speaking to an adviser is the best way to ensure you choose the best option for your company
- Keeping in touch with your adviser from an early stage can make the whole Auto Enrolment process easier Most advisers will charge extra fees for Auto Enrolment help so you want to find this out ASAP If you don’t yet have an adviser or your adviser has little Auto Enrolment experience then it’s worth finding an adviser with experience It make sense that an adviser which has completed the Auto Enrolment process several times already will help make your process run smoothly
- If you’ve been paying attention, you’ll notice that communication has been a key theme of this presentation! Here are 11 quick tips to effective communication with your workforce: