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Staffordshire Pension Fund

This presentation provides information on the automatic enrolment rules for Defined Benefit schemes and how they interact with the Local Government Pension Scheme (LGPS).

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Staffordshire Pension Fund

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  1. Staffordshire Pension Fund Automatic enrolment and the LGPS Terry Edwards, Senior Pensions Adviser, LGE 4 May 2012 www.lge.gov.uk

  2. Disclaimer The information contained in these slides has been prepared by the LGPC Secretariat, a part of the Local Government Association (LGA). It represents the views of the Secretariat, based on our current understanding of the law. It should not be treated as a complete and authoritative statement of the law. Readers may wish, or will need, to take their own legal advice on the interpretation of any particular piece of legislation. No responsibility whatsoever will be assumed by the LGPC Secretariat or the LGA for any direct or consequential loss, financial or otherwise, damage or inconvenience, or any other obligation or liability incurred by readers relying on information contained in these slides.

  3. Introduction

  4. Introduction • Look at automatic enrolment rules for DB schemes • Look at how this interacts with LGPS • Not covering how it works if don’t offer LGPS to all / some of your workers (including workers who are not employees) • Pensions Regulator will be in touch with you

  5. Automatic enrolment timetable • Starts 1 October 2012 (120,000+) • Existing employer’s staging date over period to 1 April 2017* based on numbers on employer’s PAYE payroll at 1 April 2012 (incl. pensioners and councillors) *Existing employers with 50 or more persons on PAYE scheme at 1 April 2012 but less than 50 FTE workers – staging date is between 1 October 2015 and 1 April 2017. New employers setting up between 1 April 2012 and 30 September 2017 - staging date is between 1 May 2017 and 1 Feb 2018. New employers setting up from 1 October 2017 – automatic enrolment rules apply immediately.

  6. Automatic enrolment timetable • Employers with more than one PAYE ref number – largest PAYE scheme (number of persons) determines staging date that applies • Employers who share a single PAYE scheme with other employers will all have same staging date, determined by that PAYE scheme

  7. Automatic enrolment timetable • Rules kick in from employer’s staging date • Employer can delay automatic enrolment for eligible jobholders (type 1) beyond staging date* in respect of current, but not new, eligible jobholders (type 1) who are eligible to join LGPS on and before staging date • Employer can opt to bring forward staging date * Was 4 years to October 2016. Extended to 4 years and 4 months beyond date section 3 of Act comes into force (still October 2016). DWP to consult on this being to October 2017.

  8. Definitions • Worker = contract of employment / contract to perform services personally (excludes office holders e.g. councillors) • Jobholder = worker, 16 or over but under 75 with qualifying earnings • Qualifying earnings (gross) = >£5,035 and not more than £33,540* • Earnings = salary, wages, commission, bonus, overtime, SSP, SMP, ordinary + additional paternity pay, statutory adoption pay * Planned to rise to £5,564 and an upper limit of £42,475 (to align with National Insurance contributions lower and upper earnings limits)

  9. Three types of employee

  10. New Employees

  11. New employees • Type 1 : New eligible jobholders - automatically enrolled into “automatic enrolment scheme” - can apply a 3 month waiting period (but employee can opt in) • Type 2 : New non-eligible jobholders - can opt to enrol in “qualifying scheme” • Type 3 : New entitled workers - can opt to enrol in a scheme

  12. How will this work in LGPS? • Currently, all employees 16+ and <75 eligible to join LGPS (except < 3 month contracts) • Amend LGPS so that: • all eligible employees automatically join LGPS (incl eligible admitted body employees) • those with <3 month contracts can opt in • but still need to comply with Act and SIs

  13. Info requirements – Types 1 and 2 • New employee with contract for 3 months or more will auto-join LGPS • Within 2 months of start date, er to notify ee in writing - is active member of a “qualifying scheme” (and er must offer a “qualifying scheme” if ceases to offer LGPS) - where to obtain further pensions info

  14. Info requirements – Type 3 • New employee with contract for 3 months or more will auto-join LGPS • No information requirements (but if become Type 2 or Type 1 send Type 1 / Type 2 letter within 2 months)

  15. Opt out rules • Current LGPS opt out rules and procedures apply

  16. Info requirements – Types 1, 2 and 3 • New employee with contract for less than 3 months will not auto-join LGPS • Er to issue postponement notice within 1 month of starting - enrolment postponed • deferral date (max or 3 months from start date) • can opt in before end of deferral date • written election to er must be signed • electronic election must include statement “submitted personally” • details of where to obtain further pensions info

  17. Info requirements – Types 1, 2 and 3 - if eligible jobholder (Type 1) at end of deferral period will be automatically enrolled • the earnings trigger for Type 1 automatic enrolment (>£7,475*) * Planned to rise to £8,105 (to align with the PAYE threshold)

  18. Optant out who subsequently becomes Type 1 for first time • Automatically enrol from date first becomes Type 1 • Provide “eligible jobholder” with information • Provide Pensions Section with information

  19. Info to eligible jobholder (Type 1) • Before / within 1 month of automatic enrolment date tell jobholder: - they’ve been enrolled + enrolment date - contact details for scheme + for more pensions info - ee conts will be deducted from pay - express ee and er conts as % or amount of pen pay or qualifying earnings - confirm tax relief given under net pay arrangement - if ceases to be eligible for LGPS, er must provide new qualifying scheme - give loads of info on right to opt out / back in

  20. Info to Pensions Section (Type 1) • Before / within 1 month of enrolment date tell AA: - name, gender, DOB, NI number** - home address (and work address*) - e-mail (work if provided, home if known) * - automatic enrolment date - gross earnings in pay ref period * - ee and er conts as % or amount of pen pay or qualifying earnings * * AA can state that they do not require this info ** Or within 1 month of receipt of NI number

  21. Optant out who subsequently becomes Type 2 for first time • Provide “non-eligible jobholder” with information

  22. Info to non-eligible jobholder (Type 2) • Before / within 1 month of first meeting conditions for being a “non-eligible jobholder”, employer must tell jobholder: - can opt to enrol in the “qualifying scheme” i.e. LGPS (to which er will contribute) - written election to er must be signed - electronic election must include statement “submitted personally” - details of where to obtain further pensions info Note: if opts to enrol, enrolment date is first available pay ref period and info requirements would be the same as for Type 1

  23. Optant out who subsequently becomes Type 3 for first time • Provide “entitled worker” with information

  24. Info to entitled worker (Type 3) • Before / within 1 month of first meeting conditions for being an “entitled worker”, employer must tell worker - can opt to join a scheme (i.e. LGPS) - written election to er must be signed - electronic election must include statement “submitted personally” - details of where to obtain further pensions info Note: if opts to join, enrolment date is in accordance with LGPS rules and info requirements to Administering Authority are the same as for Type 1 except don’t have to provide enrolment date (but will do so in practice). No equivalent of Type 1 info requirements to the worker.

  25. Can optants out who become Type 1 opt out? • Yes - after enrolled • Prescribed form (from AA) • Can opt out up to one month* after later of enrolment date or date er gave enrolment info * 6 weeks if first form filled in incorrectly Note: can still opt out of LGPS after one month / 6 weeks but this is then under the LGPS opt out rules

  26. Can optants out who opt in on becoming Type 2 opt out? • Yes - after enrolled (but can opt out / rescind opt in before enrolment date) • Prescribed form (from AA) • Can opt out up to one month* after later of enrolment date or date er gave enrolment info * 6 weeks if first form filled in incorrectly Note: can still opt out of LGPS after one month / 6 weeks but this is then under the LGPS opt out rules

  27. Can optants out who opt in on becoming Type 3 opt out? • Yes – under LGPS rules

  28. Process after opting out – Types 1 + 2 • Er must inform AA of opt out • AA must refund to er, any ee and er conts paid to Fund • Er must refund ee conts • Refunds to be paid within one month of receipt of opt out form (unless payroll missed, then by end of next pay period)

  29. Keeping records on optants out – types 1 +2 • Er must keep copy opt out form for 4 years • AA must keep name of optant out, date er notified AA of option out, date of cessation of membership

  30. How will this work in LGPS? • Suggest, regardless of staging dates, AA require all employers to standardise opt out forms / procedures from, say, 1 October 2012 (using prescribed form) • Suggest this covers Types 1, 2 and 3 • Subject to DCLG making amendments to LGPS

  31. Do Type 1 optants out have to be re-enrolled? • Yes - within 3 months before / after 3rd anniversary of staging date (provided continuous employment, and not opted out within previous 12 months, and is type 1 on re-enrolment date) • Thereafter, within 3 months before / after 3rd anniversary of previous chosen re-enrolment date Information requirements same as for automatic enrolment Opt out procedures same as for automatic enrolment

  32. Do Type 1 optants out have to be re-enrolled - continued • But if ceases to be Type 1 (becomes type 2 or 3), and again becomes Type 1 before re-enrolment date without a break, don’t have to enrol then, but do have to on re-enrolment date (provided still type 1 on re-enrolment date) • But if ceases to be Type 1 (becomes Type 2 or 3), and again becomes Type 1 after re-enrolment date without a break, don’t have to enrol when again becomes Type 1 • So, Type 1 only enrolled on staging date, or on first becoming Type 1 after staging date, or on re-enrolment date if Type 1 on that date Note: if ceases employment and recommences as Type 1, then treat as new Type 1

  33. What about Type 2 and Type 3 optants out / non-joiners? • If type 2 or Type 3 at each triennial anniversary of staging date, no need to communicate with them

  34. Existing Employees

  35. What about Type 1 and Type 2 jobholders who, at the staging date, are already in LGPS? • Remain in LGPS • Within 2 months of staging date, er to notify ee - remains active member of a “qualifying scheme” (and er must offer a “qualifying scheme” if ceases to offer LGPS) - where to obtain further pensions info Note: technically can apply transitional delay period to these too.

  36. What about Type 3 workers who, at the staging date, are already in LGPS? • Remain in LGPS • No info requirements (but could notify ee that will remain in LGPS)

  37. What about existing Type 1’s with contract for less than 3 months? • Automatically enrol from the staging date unless apply a 3 month postponement period (but employee can opt in*) or employer applies the transitional delay • If automatically enrol - info requirements same as for new Type 1 • If use 3 month postponement period – postponement info requirements same as for new Type 1 postponement * Requires amendment to LGPS Regulations to permit this.

  38. What about existing Type 1 optants out? • Automatically enrol from the staging date (even if opted out within 12 months prior to staging date) – info requirements same as for new Type 1 • But employer can opt for transitional delay* * Was 4 years to October 2016. Extended to 4 years and 4 months beyond date section 3 of Act comes into force (still October 2016). DWP to consult on this being to October 2017.

  39. If employer opts for transitional delay for Type 1 optants out • Within 1 month of staging date notify jobholder - automatic enrolment deferred to end of transitional period but can elect to join the LGPS (a “qualifying scheme”) to which er makes a contribution - written election to join must be signed - electronic election must include statement “submitted personally” - details of where to obtain further pensions info

  40. If employer opts for transitional delay for Type 1 optants out • Must automatically enrol at end of transitional period (provided still type 1 at end of that period) • But if ceases to be Type 1 (becomes type 2 or 3), and again becomes Type 1 after end of the transitional period, enrol when first becomes Type 1 again Note: if ceases employment and recommences as Type 1, then treat as new Type 1

  41. What about existing Type 2 and Type 3 optants out? • Type 2 and Type 3 - give same information as for new employee about right to opt in from staging date (or date they first become Type 2) even if opted out within 12 months prior to staging date, and -automatically enrol from date first become Type 1

  42. What about existing Type 2 and Type 3 with contract for less than 3 months? • Type 2 and Type 3 - give same information as for new employee about right to opt in from staging date (or date they first become Type 2) even if opted out within 12 months prior to staging date • Or use 3 month postponement period

  43. Bits and Pieces

  44. Contributions • Conts to be paid over electronically by 22nd of following month (or by 19th in any other case) • Except in opt out period, where conts have to be paid over by end of second month after the month which includes the automatic enrolment date

  45. Compliance • If conts not collected and paid over within 3 months of due date, er can be made to pay all conts (ees and ers) • Regulator has powers to impose penalties for non-compliance with contravention notices

  46. Registration • Er to provide Pensions Regulator with info, within 4 months of staging date (and of re-enrolment date) saying how they have complied with their duties

  47. Record keeping • Er and AA to keep records to enable Regulator to check compliance • Records normally to be kept for 6 years

  48. Issues • How can AA find out staging date for employer? • AA to consider standardising info requirements from ers from, say, October 2012 • Opt out procedures and processes

  49. Issues - continued • Ers responsible for enrolment / re-enrolment process • Should er opt for earlier staging date? • 3 month delay • Should er use transitional period?

  50. Issues - continued • Payover of conts relating to opt out period • Ers who don’t offer LGPS to all ees • Ers who want to cease offering LGPS • Fixed protection • Will new LGPS be a qualifying scheme?

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