A Guide to Compulsory Pension Provision

1. A Guide to Compulsory Pension Provision Little and Georgiou LLP

2. Pension reformWho, what, when and why? £75bn 18.3yrs c.25k 2004 12% c.2m 11m 9% Auto-enrolment recommended DB schemes open to new members Male life expectancy at age 65 Average size of DC pot used to purchase annuity Average contributions to DC Government spending on state pensions Pensioners in poverty People under-saving for their retirement Little and Georgiou LLP

3. Compulsory Pension Provision Why - To reduce dependency upon the state in retirement When - Various “staging dates” from October 2012, depending upon number of employees (and PAYE reference number if less than 30 employees) How - Via N.E.S.T. or a Qualifying Workplace Pension Scheme Little and Georgiou LLP

4. Key Learning Points so far Auto enrolment is not just about pensions, it is about processes, data, technology and payroll AE more complicated than most employers think Employers are under-prepared and leave it too late Takes longer than anticipated Don’t assume existing pension scheme can be an auto enrolment vehicle Little and Georgiou LLP

5. Not now....!Come back later

6. So what’s involved Marketing the scheme Assessment of workforce Scheme Design Postponement Statutory communications Enrol employees Manage opt outs Employer duties Complete scheme certification Record keeping Register with the Pension Regulator Continual assessment Tri annual review Re auto enrolment And so on………………. Little and Georgiou LLP

7. Assessment of payroll At staging for all existing workers On the 16th or 22nd birthday First day of employment for new employee First day of pay reference period for any other worker assessed after staging If postponement has been used – last day of postponement period Assessed based on age and “qualifying earnings” Little and Georgiou LLP

8. Eligibility of Workers Little and Georgiou LLP

9. Knowing who to auto enrol Little and Georgiou LLP

10. Knowing who to auto enrol

11. Certification Employer must choose suitable scheme for their employeesScheme contributions can be based on 8% of ‘qualifying earnings’ - £5,668 - £41,450 (2013/14). However most employers prefer to certify that schemes meet one of the tiers of ‘alternative requirements’ for qualifying. Little and Georgiou

12. Phasing Contributions Little and Georgiou

13. Opting Out All eligible employees must be auto enrolled. This must be immediately upon joining the company or any time up to 3 months after joining in order to tie in with payroll, administration, procedures or to avoid enrolling very short term employees. An Employee can choose to opt-in during the three month period. Individuals can opt out at anytime but they will only receive a refund if they opt out during the first month. Individuals who choose to opt out must be auto re- enrolled on the 3rd anniversary of the employer’s staging date. Employers will face fines (and potentially imprisonment) if they induce or otherwise encourage an employee to opt out. Opt out process must be handled by pension provider Little and Georgiou

14. Postponement Also known as “waiting period” Can be used at staging date, when an employee becomes eligible or when a new employee joins workforce It suspends the duty of assessment for up to 3 months An employee can opt in or join during this period Employer must notify employees if using postponement via statutory communications Employer must assess on last day of postponement and auto enrol eligible jobholders or if not eligible monitor each future pay reference period Little and Georgiou

15. Communications Must be direct – letter, email, payslip At staging, need to communicate with all workers, even existing scheme members Non eligible jobholders and entitled workers must be provided with information about right to opt in or join Eligible jobholders being automatically enrolled must be provided with Information about their enrolment What it means for them, including contributions and Their right to opt out Workers must be informed if postponement is being used Little and Georgiou

16. Employer duties Employer duties are not optional. The penalties for not complying are severe. Employer must ‘market’ the scheme to all employees. Employer must provide accurate and up to date payroll data to the Qualifying Workplace Pension Scheme. Employer must provide annual statements. Employer must retain specific records relating to employees’ pension benefits for a minimum of 6 years. Little and Georgiou

17. Penalties for Non Compliance Fixed penalty notices - £400 Escalating penalty notices from £50 - £10,000 per day Little and Georgiou

18. Deadlines applying from 1st April 2014 Little and Georgiou

19. Auto Enrolment – Capacity Crunch “Employers should be under no illusions: this will take time, including assessing the suitability of their existing pension arrangements or choosing a scheme and adapting their payroll, HR, pensions and IT systems” The Pensions Regulator “Pension providers turn away auto – enrolment business as capacity crunch bites” Money Marketing “An employer should ideally be thinking about auto enrolment at a minimum of at least six months ahead of their staging dates, preferably longer” Money Marketing Little and Georgiou

20. Employers required to register by staging date 50 or more people in PAYE scheme (lower estimate) 499 – 51 in PAYE Source: The Pensions Regulator, “Automatic enrolment: Staging profile and forecast volumes”, September 2012

21. Employers required to register by staging date Under 50 people in PAYE scheme (lower estimate) 140,000 <50 Source: The Pensions Regulator, “Automatic enrolment: Staging profile and forecast volumes”, September 2012

22. The Choice for Employers Employers must decide which route to take to meet the requirements of Auto Enrolment 1) Use N.E.S.T. and rely upon the web and telephone helpline support or 2) Establish a Qualifying Workplace Pension Scheme through a pension provider with the initial and ongoingassistance of Little and Georgiou Little and Georgiou

23. “Our research shows that…….employers with as few as one hundred staff – are expecting help from NEST and other providers……the fact is we won’t be able to and neither will any other provider” Roy Porter, NEST assistant director, distribution Little and Georgiou

24. What is N.E.S.T.? National Employment Savings Trust is a low-cost pension scheme set-up by the Government and delivered by Tata. N.E.S.T. must be used if a Qualifying Workplace Pension Scheme is not in place. Scheme of last resort N.E.S.T. Features; Five default Target Date Funds - based on time to retirement (not risk) Target Date Funds manage asset allocation as retirement date approaches Initial charge of 1.8% per contribution (until set-up costs are met) Annual Management Charge of 0.3% Estimated Total Expense Ratio of 0.5% (based on N.E.S.T. figures) No Transfers-In or Transfers-Out Contribution limit of £4,600 (for 2014/15 tax year) Retirement Options restricted to Annuity, Open Market Option or Triviality Little and Georgiou

25. Considerations: N.E.S.T. N.E.S.T. Little and Georgiou

26. What is a Qualifying Work Place Pension Scheme? A Qualifying Work Place Pension Scheme is a new arrangement administered by a Pension Scheme Provider Qualifying Workplace Pension Scheme can be used as an alternative to N.E.S.T. Qualifying Workplace Pension Scheme Features; Many investment funds to choose from A default fund must be nominated (a risk-based fund with Lifestyling) Flexibility of charging structure Can Transfer-In and Transfer-Out of Scheme Little and Georgiou

27. Considerations: Qualifying Workplace Pension Scheme Qualifying Workplace Pension Scheme Little and Georgiou

28. Little & Georgiou – Our Service Services to the Employer Advice and assistance on choosing an appropriate Qualifying Workplace Pension Scheme Advice and assistance on the setting up and operation of the Qualifying Workplace Pension Schemeincluding the enrolment of members Periodic reviews of the Qualifying Workplace Pension Schemeto make sure it continues to meet the requirements of the company and that it complies with pensions legislation Specific advice and guidance regarding new responsibilities under pensions reform and automatic enrolment Little and Georgiou

29. Little & Georgiou – Our Service Services to the Employees Support in joining the Qualifying Workplace Pension Schemeincluding the provision of communications/guidance around investment choices Regulated advice concerning joining the Qualifying Workplace Pension Scheme At the request of an employee, advice on bringing transfers into the scheme; paying additional single premiums into the scheme; increasing regular contributions above the standard scheme basis Little and Georgiou