Automatic enrolment webinar Are you ready?

1. Neil EsslemontHead of Industry liaison teamRebecca WoodleyIndustry liaison team 13 March 2014 Automatic enrolment webinar Are you ready? The information we provide is for guidance only and should not be taken as a definitive interpretation of the law.

2. Automatic enrolment – Declaration of Compliance (registration) Since the recording of this webinar “registration” is now referred to as “declaration of compliance”. The information we provide is for guidance only and should not be taken as a definitive interpretation of the law.

3. Introductory information This webinar assumes a basic understanding of automatic enrolment You may wish to look at our planning tool for more information These slides are available to download now

4. Getting ready for automatic enrolment Understand the employer duties. Engage the professionals you will use to help you with your employer duties. Choose a pension. Check the suitability of payroll and IT software. Find out who to enrol. Decide how you will communicate the pension changes to your workforce. Determine if you will use postponement and how.

5. Overview of legal duties and safeguards Automatic enrolment legislation gives employersa duty to: • automatically enrol all eligible jobholders • communicateto workers providing timely and appropriate information • allow non-eligible jobholders to opt inand entitled workers to join • manage opt outs within the opt-out period and promptlyrefundcontributions • automatically re-enrolall eligible jobholders every three years • complete the declaration of compliance (registration) with the Regulator • keep records, and • pay the pension contributions to the scheme provider 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 therecruitmentprocess.

6. Planning timeline Planning tool:www.tpr.gov.uk/planner

7. Engage professional help You may wish to ask the following for their help: pension providers, financial advisers, payroll software or middleware providers, accountants, and/or bookkeepers. You should consider: what elements of the duties they will help you with, and remember that the responsibility with complying with the automatic enrolment legislation will remain with the employer.

8. What to do before your staging date Choose a pension Examine your workforce Communicate to staff Check processes and software Finalise your action plan These may need to be done at the same time or in any order

9. Pension schemes: Defined contribution (DC) – eg money purchase Defined benefit (DB) – eg final salary or career average DC schemes can be contract-based or trust-based: A contract pension scheme is where there is a contract between the employee/worker and the pension provider. In a trust-based scheme, the trustees are responsible for delivering the terms of the trust and for running it in the best interests of its beneficiaries. Master trusts offer pensions to employees of more than one employer. Some pension providers specialise in providing master trust pensions (also known as super trusts). Pension scheme types

10. What pension schemes can be used? Must be used for automatic enrolment and opt ins Workers already active members of a qualifying scheme do not need to be automatically enrolled Automatic enrolment scheme Employers will need to contribute to the pension scheme • Qualifying scheme • must be tax registered: • and meet minimum criteria Employers may also use a qualifying scheme or an automatic enrolment scheme for entitled workers • Scheme forentitled workers • scheme is registered • must be registered in the UK or EEA* • must have no barrier to automatic enrolment • must be a qualifying scheme Employers are notrequired to make an employer contribution *European Economic Area states

11. Using an existing pension scheme If you have an existing scheme*, what can you use it for? Is it a qualifying scheme and does it satisfy the minimum criteria? If it is not a qualifying scheme, it may be possible to change the scheme rules, so that active members would not need autoenrolment. If it is a contract-based scheme, it is likely to need a jobholder agreement for each active member (an agreement by the member to pay the difference between the employer contributions and the legal minimum total contribution). Do you also want to use this scheme to automatically enrol your workers? Your existing scheme provider may not allow it be made an automatic enrolment scheme (eg the scheme provider would need to provide opt out forms on request). * View our webinar on Implementing automatic enrolment systems and pension schemes.

12. Choosing a new pension – factors to consider It is the employer’s responsibility to choose a pension scheme for their workers. Some things to consider: Most people will stay in the default fund – does it provide value for money? Some providers can cater for a wider range of languages for members than others. For help on how to select a good scheme, please see: www.tpr.gov.uk/employers/setting-up-a-pension-scheme.aspx

13. Choosing a new pension – factors to consider continued Different pension providers may have different criteria for accepting employers and may ask you about: the number of staff expected to be enrolled estimated average pension contributions per member per month payroll frequency (some providers may not assess weekly paid staff). You may also wish to view our webinar on ‘Implementing automatic enrolment systems and pension schemes’ (see our Useful links slide).

14. Choosing a new pension – how to find one How will you find a suitable pension if you need or want to use anewscheme? For further information and a list of pension providers see: The National Association of Pension Funds (NAPF)* The Association of British Insurers(ABI)* Pension providers Not all pension providers may offer you a pension scheme They may not give you an answer immediately so ask for their timescales Providers may be at full capacity or have long waiting times You may wish to ask more than one provider at a time. National Employment Savings Trust (NEST)* is a pension scheme that all employers can use to meet their duties  but don’t leave it too late. * These can be found on our Useful links slide

15. Mandatory communications to staff There are a number of occasions where an employer is required by law to communicate with their workers: At staging you need to communicate to all workers, even scheme members. The information will need to be provided directly – by letter, email (or other direct means). Who will do what communications – employer or the pension provider? You are likely to want to customise the letter templates*. Whenwill you issue these letters/email (and at what point in the pay cycle)? How will you check your employee data is accurate (eg addresses)?  Remember: statutory opt out forms should not be issued by the employer. * See our Useful links slide

16. Additional communications to staff Many employers will want to communicate more than the statutory minimum: Are your staff aware of any changes to existing pensions arrangements? Do you need to formally consultwith staff/unions on these changes? Many employers have chosen to communicate early to their staff. You may wish to use wall posters or news bulletins (eg paper or intranet). There is a ‘We’re all in’ poster available to download on our website (you can add your company name and logo) at www.tpr.gov.uk/employers/raising-awareness-about-automatic-enrolment.aspx

17. How and when to communicate to workers • Statutory communications must be direct (eg letter, email, payslip). • At staging, you need to communicate to all workers, even scheme members. • Need to inform of rights the first time* a worker becomes a particular category *Unless they are already an active member of a scheme provided by the employer and, if they are a jobholder, the scheme is a qualifying scheme. The use of a general notice A or B postponement notice discharges this duty.

18. What to communicate to workers • On staging, workers already members of a qualifying pension scheme must be provided with information* about the scheme. • Non-eligible jobholders and entitled workers must be provided with information* telling them about their right to opt in or join a pension scheme. • For eligible jobholders being automatically enrolled (and non-eligible jobholders being enrolled after opting in) they must be provided* with: • information about their enrolment, • what it means for them, including the contributions, and • their right to opt out. • Workers subject to a postponement need to be given key information* such as the length of the postponement period and their rights to opt in or join. • * See Useful links for template letters

19. Check suitability of payroll and IT systems What software* will you use to carry out: assessment enrolment communications, and calculation of pension contributions This is likely to require data held by payroll and HR systems. Choices: payroll software, and/or non-payroll software – middleware (this may be offered by the pension scheme provider). * View our webinar on Implementing automatic enrolment systems and pension schemes

20. Assessment process Assess Assessment results Payroll data £ Enrolment letter to worker Automatic enrolment process Payment £ Run payroll Enrol Enrolment instructions to pension provider Payroll instructions £ Calculate deduction Pension scheme rules £

21. Software issues Do you want to use payroll or middleware software to assess your workers? can your payroll provider do this for your payroll product/version? or would you need to upgrade your payroll system to do this? How will you automate staff communications (egmailmerge software)? Can your IT/computer systems cope if you need to run additional software? How will you ensure all your data is accurate and up to date (eg NI numbers, dates of birth, addresses). Where is the data stored (eg on an integrated HR/payroll or separately)? How will these systems work together – what data standards do they support? Will you need to send data over your network or over the internet? Will all of the software do what you need it to do? You should plan to test these systems before you go live.

22. Finalising your action plan What needs to happen after staging?

23. Automatic enrolment and Opt Outs Window for possible Opt-Out period Joining window Latest possible date opt-out period ends (unless invalid opt-out extends opt-out period to 6 weeks) Earliest possible date opt-out period ends 1 month 6 weeks 1 month Latest date by which active membership and provision of jobholder information and enrolment information must be achieved and therefore the latest possible start date for 1 month opt-out period. Backdating of scheme membership to the automatic enrolment date Earliest possible start date for 1 month opt-out period

24. Staging date Scenario A Assessment date on first day of PRP Monthly pay reference period (PRP) Key: C – Payroll cutoff R – Payroll run P– Payday 1st 31st 1st 30th 1st 31st 28th 28th 28th C R P0 C R P1 C R P2 • Staging and a calendar month PRP • Pay reference period runs from 1stto last day of each month • Assessment date is 1 April • Total qualifying earnings may not be known until payroll cutoff or later. • If the worker needs to be automatically enrolled: • First deduction needs to made in payday P1 on 28 April • Opt-Out window may not start until after deduction taken • Scheme contribution based on 100% of May pensionable pay. Opt-Outwindow could start Issue letter to worker and set up active membership Total QE paid in PRP > earnings trigger ? No No statutory duty to enrol Yes UK worker aged 22 to SPA? No Yes April May March Automatic enrolment triggered

25. Postponement Postponement suspends the duty of automatic enrolment and the need to assess and can be used: at the employer’s staging date for any or all existing workers on the first day of employment for any new joiner after the staging date, and on the date a worker meets the criteria to be an eligible jobholder. Only one postponement per worker can be made at a given time. Each worker can be postponed from one day up to maximum of three months. The employer must notify any postponed worker within six weeks of the start of postponement. The worker has the right to opt in or join during postponement. Employer must assess on the last day of postponement and: automatically enrol eligible jobholders, and for those workers not eligible, monitor them each future pay period. Postponement does not change or delay the staging date

26. Timescales for postponement at staging Assessment date/ automatic enrolment date (for eligible jobholders) Staging date Latest date by which active membership and provision of jobholder information and enrolment information must be achieved. Opt ins could be received from this date Joining window Postponement notices must be issued by this date(for staff postponed on the staging date) Up to 3 months postponement Backdating of scheme membership to the automatic enrolment date 6 weeks 6 weeks

27. Opt-ins – one calendar month pay reference period Staging date Latest date by which active membership and provision of jobholder information and enrolment information must be achieved. 1st 1st Joining window Earliest opt in enrolment date (for monthly paid jobholders) Backdating of scheme membership to the enrolment date 1 month PRP 1 month PRP 6 weeks Opt-in request received in this period

28. Achieving active membership • For a trust-based scheme, an employer: • needs to communicate to the trustees to establish active membership • needs to understand when active membership starts (eg with NEST it is on the 3rdworkingday after processing the enrolment request). • For a contract-based scheme an employer: • will have to make arrangements with the pension scheme provider, so that the jobholder is given the terms and conditions of the contract • will need to know when the pension provider does this. • In both instances, there will be a process to follow and, once understood, these timings can be factored into your timelines.

29. Example timeline 1 (for 1 April 2014 staging date)

30. Example timeline 1 (for 1 April 2014 staging date)

31. Example timeline 2 (for 1 April 2014 staging date)

32. Any questions?

33. Useful links Staging date tool:www.tpr.gov.uk/employers/tools/staging-date.aspx Planning tool:www.tpr.gov.uk/planner Questions to ask when selecting a new scheme providerwww.tpr.gov.uk/docs/selecting-a-good-automatic-enrolment-scheme.pdf Lettertemplates for employers:www.tpr.gov.uk/employers/letter-templates-for-employers.aspx Information about declaration of compliance (registration):www.tpr.gov.uk/employers/automatic-enrolment-registration.aspxwww.tpr.gov.uk/docs/automatic-enrolment-online-registration-checklist.pdf Ourdetailed guides for employers and pension professionals:www.tpr.gov.uk/doc-library/automatic-enrolment-detailed-guidance.aspx

34. Useful links continued… More information about pensions and automatic enrolment: The Association of British Insurers:www.abi.org.uk/pensionproviders The National Association of Pension Funds:www.napf.co.uk National Employment Savings Trust:www.nestpensions.org.uk Independent Financial Advisers:www.unbiased.co.uk The Pensions Regulator: www.tpr.gov.uk/docs/selecting-a-good-automatic-enrolment-scheme.pdf

35. Useful links continued… Other webinars: Automatic enrolment – dispelling the myths www.tpr.gov.uk/press/webinar-automatic-enrolment-dispelling-the-myths.aspx Identifying your workforce and calculating minimum contribution levels www.tpr.gov.uk/press/webinar-identifying-workforce-calculating-minimum-contribution.aspx Implementing automatic enrolment systems and pension schemes www.tpr.gov.uk/press/webinar-implementing-automatic-enrolment-systems-schemes.aspx

36. We would really appreciate your feedback on this webinar. Please click on the link below to complete. https://registration.livegroup.co.uk/ae_areyouready/engage/ Feedback

37. We are here to help! Contact us at:www.tpr.gov.uk/contact-us.aspx Subscribe to our news by email:https://forms.thepensionsregulator.gov.uk/subscribe.aspx Connect with us on LinkedIn:www.linkedin.com/groups?gid=2675456 Follow us on Twitter:https://twitter.com/TPRgovuk Thank you The information we provide is for guidance only and should not be taken as a definitive interpretation of the law.

38. Useful links Glossary of key terms Summary of deadlines Use of postponement More opt in examples Supplementary slides

39. Summary of deadlines (for deadlines ending from 1 April 2014)

40. Use of postponement Employers have said they have used postponement to: Align the assessment date of new joiners starting at different dates Smooth the process in respect of: workers with unusual spikes in earnings, short-term workers who are expected to only work a month or two, and workers who trigger automatic enrolment just before ceasing employment. Align automatic enrolment with existing payroll processes to: avoid a part period contribution (eg when people are turning 22), and maximise length of the opt out period that falls before payroll cut-off. Allow time for a worker to setup salary sacrifice for pension contributions

41. Opt Ins – one week pay reference period Staging date Latest date by which active membership and provision of jobholder information and enrolment information must be achieved. Joining window Earliest opt-in enrolment date (for monthly paid jobholders) Backdating of scheme membership to the enrolment date 1 week pay periods 6 weeks If opt-in request is received in this period

42. Scenario B Assessment date on 1st day of month Staging date Monthly pay reference period (PRP) Key: C – Payroll cutoff R – Payroll run P– Payday 6th 5th 6th 5th 6th 5th March April Feb 28th 28th 28th C R P0 C R C R P2 P1 Opt-out window could start Issue letter to worker and set up active membership Total QE paid in PRP > earnings trigger ? No No statutory duty to enrol Yes UK worker aged 22 to SPA? No Yes 1st • Staging with a tax month PRP • Pay reference period runs from 6th day to 5th day of each month • Assessment date on 1 April (ie the staging date) is after the March payday P1 on 28 March • Total qualifying earnings (in PRP 6March to 5 April) assessed using old tax year earnings thresholds. • If the worker needs to be automatically enrolled (from 1 April): • First deduction needs to made in the next payday P2 on 28 April • Opt-out window could start beforefirst deduction taken • Contribution based on scheme rules(eg for a legal min scheme, based on 100% of April’s qualifying earnings). Automatic enrolment triggered

43. Opt Ins – one tax month pay reference period Staging date Latest date by which active membership and provision of jobholder information and enrolment information must be achieved. 1st 6th Joining window Earliest opt-in enrolment date (for monthly paid jobholders) Backdating of scheme membership to the enrolment date 1 month PRP 1 month PRP 5th 6th 5th 6th 6 weeks If opt-in request is received in this period (1st to 5th inclusive, if not past payroll cutoff)

44. Glossary

45. Automatic enrolment terms Automatic enrolment scheme – a qualifying pension scheme which can be used for automatic enrolment Eligible jobholder (EJH) – a worker who must be automatically enrolled into an automatic enrolment scheme Entitled worker (EW) – a worker who is entitled to join a pension scheme Jobholder – an eligible jobholder or non-eligible jobholder Non-eligible jobholder (NEJ) – a worker who has the right to opt in to an automatic enrolment scheme Office holder – a person who has been appointed to a position by a company or organisation, but doesn’t have a contract or receive regular payment Personal services worker – an individual who has contracted to perform work or services personally (this is sometimes referred to as a ‘contract of services’)

46. Automatic enrolment terms continued… • Postponement – an optional mechanism to delay the automatic enrolment duties for workers • Qualifying earnings – the earnings which determine a worker’s category (EJH, NEJ or EW) and (as a band of earnings) may be used as the definition of pensionable earnings • Qualifying scheme – a pension scheme which meets the minimum criteria and so existing members who are eligible jobholders will not need to be automatic enrolled • Staging date – the start date of an employer’s automatic enrolment duties • Worker – an individual who works under a contract of employment (or a personal services worker)

47. Other terms Active member – a person who is currently a member of the pension scheme (and would normally be contributing to the scheme) Defined benefit (DB) – a pension scheme where the benefits payable on retirement are known (eg ‘final salary’, where the retirement income is based on the member’s salary) Defined contribution (DC) – a pension scheme where the contributions are known, but the benefits are not guaranteed and are likely to depend on the fund value at retirement Deferred member – a person who is no longer an active member of the pension scheme, but has accrued some benefits (payable on retirement or could be transferred)

48. Other terms continued… • Hybrid – a pension scheme with a mixture of DB and DC components • PAYE (Pay As You Earn) – HM Revenue & Customs’ (HMRC) tax payment mechanism • PAYE scheme – HMRC’s record for an employer who employs a worker or workers for whom PAYE taxable income is payable • PAYE scheme reference number – a number issued by HMRC to identify each employer’s PAYE scheme(s) • Pensionable earnings – the earnings on which pension contributions are due