Automatic enrolment An Overview

1. Norfolk Association of Local CouncilsSummer Conference – Norwich City Football Club Ian Digby Industry liaison manager 1 July 2014 Automatic enrolmentAn Overview The information we provide is for guidance only and should not be taken as a definitive interpretation of the law.

2. Topics Why is automatic enrolment being introduced? What employers need to do Staging dates and overall timetable Who are your workers? Worker categories and the duties and rights for pension scheme enrolment Communicating with workers Qualifying earnings and the automatic enrolment processes Postponement Opt-ins and Opt-outs Monitoring worker status and re-enrolment Keeping records Declaration of compliance (registration)

3. Why is automatic enrolment being introduced? • As a society we are living longer, healthier lives. • There are currently four people of working age for every pensioner  by 2050 there will be just two. • Millions of people are under-saving for their retirement. • Only 1 in 3 private sector workers were in a pension scheme in 2012 and the trend has been downwards for the last 40 years. • The reforms being introduced now will help millions of individuals to save more (or save for the first time) for their retirement. 7 million people are under-saving

4. 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 declaration of compliance (registration) with the Regulator • keep records, and • maintain payments of contributions. 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

5. What employers will need to do • Know when you need to be ready • Provide a point of contact • Develop your initial plans • Find out who to enrol • Choose your software and check records • Choose a pension scheme • Automatically enrol your staff • Tell your staff • Complete your declaration of compliance (registration) • Maintain records • Fulfil ongoing responsibilities

6. Planning timeline - www.tpr.gov.uk/planner

7. Staging • The employer duties apply to each employer fromtheir staging date: • the duties apply toallof the employer’s workers from that date. • The staging date is based on the number of people in the employer’s PAYE scheme(s) as of 1 April 2012: • any subsequent changes in PAYE size or usage have noeffect on the staging date. • Generally, larger employers will stage before smaller ones: • new employers* will go last, from May 2017. Do not assume you know the number of people- use our tool *Employers that did not exist (or werenot using a PAYE) as of 1 April 2012. Large employers Medium employers Small/micro employers New*employers Oct 2012 May 2017 June 2015 Feb 2018 April 2014

8. Staging profile (volumes of employers)

9. Who are your workers? Employers will have duties for workers that are: aged 16 to 74 (inclusive), and who work or ordinarily work in the UK*, and it does not matter if they are full or part-time, permanent or temporary. There may be other people who will also be included: overseas workers, who are considered ordinarily working in the UK. Workers will include: employees, and people not employees, who are personal services workers. * the Channel Isles and the Isle of Man are outside the UK

10. Are they a personal services worker? • The employer needs to judge whether or not an individual with a contract to perform work or services personallyis undertaking the work as part of their own business. • Does the employer: • have control over an individual’s method of work (eg hours worked)? • provide any employee benefits? • bear all the significant financial risks in carrying out the work (eg the worker is not financially responsible for their faulty work)? • provide what is required for the individual to carry out the work (eg tools)? •  If most or all of the above are true, then it would be reasonable to consider that they are not undertaking the work as part of their own business – and they are a personal services worker. • The list above is not exhaustive and an employer must take into account all relevant considerations and make a reasonable judgement.

11.  Who is excluded? • Exclusions from automatic enrolment duties include: • some office-holderswho are not considered workers, (eg non-executive director, trustee or elected member), but are only excluded for the activities they carry out as an office holder • serving members of the military are exempt, and • a company with only one employee, if that employee is also a director of that company (but only for the work they carry out for that company).

12. Who is the worker’s employer? • For a worker who works under a contract of employment (an employee) or who is a personal services worker directly contracted to perform work for the company who pays them: •  the employer will be the legal entity named in the contract. • Otherwise: • for a worker who is supplied by an agent to a third party, to perform work personally, under a contract or arrangement between the agent and the third party, then: • the agent or third party will be the agency worker’s employer, depending on which is responsible for paying the worker • or, if it cannot be determined who is responsible for paying the worker, then whichever actually pays the worker will be considered as their employer.

13. Worker categories Non-eligible jobholders can Opt-in to an automatic enrolment pension scheme Entitled worker Can request to joina pension scheme Under £5,772**pa Between £5,772 pa and up to £10,000**pa NonNon-eligible jobholder -Eligible Jobholder Eligible jobholder Non-eligible jobholder Non-eligible jobholder More than £10,000**pa Employer must automatically enroleligible jobholders into an automatic enrolment pension scheme * SPA = State Pension Age ** Figures for 2014/15

14. Thresholds v Pay Reference Periods (PRP) 2014-15 †For other PRP durations, multiply the number of weeks in the PRP by the weekly amount (eg £192.00) or number of months by the monthly amount (eg £833.00) etc - or pro-rata if not an exact multiple of any of the above. N.B. The Secretary of State will review these figures each tax year.

15. Assessing your workers Employers will need to assess all their workers on their staging date unless they choose to use ‘postponement’ (described in later slides). All qualifying earnings mustbe used to assess a worker’s category (ie eligible jobholder, non-eligible jobholder or entitled worker). Qualifying earnings contains these pay elements: salary/wages, commission, bonuses, overtime and statutory payments(excluding expenses). Eligible jobholders must be automatically enrolled into a suitable scheme but any active member of a ‘qualifying’ pension scheme with that employer will not need to be automatically enrolled. After the staging date, employers will have to: assess all new workers who join them assess some workers every pay period (see planning tool ‘ongoing responsibilities’) assess someworkers again every three years.

16. 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 or service (can be referred to as “middleware”) this may be offered by the pension scheme provider.

17. Pension schemes Pension schemes can be either: defined contribution (DC) eg ‘money purchase’ defined benefit (DB) eg ‘final salary’ or ‘career average’. Qualifying schemes: if an existing scheme is not a qualifying scheme, scheme members would need to be automatically enrolled into an automatic enrolment scheme if they are eligible jobholders employers may want to change the contributions levels and/or scheme rules of their existing schemes to make them qualifying. if qualifying earnings used for pension scheme rules, only qualifying earnings between £5,772*pa and £41,865*pa used for calculation of pension contributions (e.g. for 1 week Pay Reference Period, if QE <= £111.00 in PRP in 2014-15 then contribution = £0). * Pro-rata of annual amount used in each Pay Reference Period. These figures are for 2014-2015. The Secretary of State will review this amount each tax year.

18. 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

19. DC scheme minimum contributions Phase 3 Phase 1 Phase 2 Min DC 8% total* Min DC 5% total* *% of qualifying earnings Min DC 3% employer* Minimum DC 2% total contribution* Min DC 2% employer* Large employers Medium employers Newemployers Small/micro employers Minimum DC 1% employer contribution* Feb 2018 Oct 2017 May 2017 June 2015 April 2014 Oct 2012 Oct 2018

20. 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: the employer and pension provider need to have a signed agreement (where the employer commits to pay the legal minimum employer contributions), and 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).

21. 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

22. 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 until they leave / retire– does it provide value for money? Some providers can support a wider range of languages for the 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

23. 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 and a day 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

24. Opting-in and joining Entitled workers can request to join a scheme at any time. Non-eligible jobholders can Opt-in at any time. Eligible jobholders can Opt-in during postponement. On receipt of any request, employers need to: assess the worker, to see if they are a jobholder or entitled worker, then enrol jobholders into an automatic enrolment scheme, and enrol entitled workers into a scheme of the employer’s choice. A jobholder must not be required to carry out any further action to achieve active membership (eg the pension scheme should have a default fund).

25. ‘Opting-out’ Workers automatically enrolled (or who have opted in) may ‘Opt-out’. Employer must inform staff of their right to Opt-out and how to Opt-out. The employer must notgive out or send out ‘Opt-out’ forms: requests to ‘Opt-out’ must be handled by the scheme provider, and completed forms would normally be sent to the employer. A one calendar month Opt-out window starts on the later of two dates: once the worker is an active member of the pension scheme, or when the employer issues a notice of enrolment letter/email to the worker. The worker will get a full refund of all contributions. Early Opt-outs (before the Opt-out window starts) – are not allowed. After the Opt-out window has closed, the worker may still request to cease membership of the pension scheme (under the scheme rules).

26. Communicating to workers • At staging, employers will need to communicate* to all their workers, (including existing pension scheme members). • Employers need to inform workers of their rights and whether they are being automatically enrolled or postponed. • The deadlines for communication are: • two months after staging; for existing scheme members, or • within six weeks for all other communications. • Communications must be sent directly to the individual (eg by letter, email, HR web portal). • We have provided example ‘template’ letters, which may be customised. • * See our planning tool and ‘communicate to staff’

27. Re-enrolment The re-enrolment date is every three years from the employer’s staging date. However, an employer may choose to move their re-enrolment date to any day, up to 3 months before, or after, the third anniversary. The employer will need to continue to assess any workers they are monitoring* every pay reference period. In addition, any person who, on the re-enrolment date: is not an active member of a qualifying scheme, and has opted out or ceased membership more than 12 months ago ... will need to be re-assessed and, if an eligible jobholder, automatically enrolled. * See our planning tool and ‘ongoing responsibilities’

28. Record-keeping Employers must keep records* about their workers and the pension scheme used to comply with the employer duties (pension providers and trustees will also have duties to keep records). An employer can use electronic or paper filing systems to keep or store any records, as long as these records can be produced in a legible way. Most records must be kept for six years. Those that relate to opting out must be kept for four years. The records must be provided to The Pensions Regulator, on request. We can conduct an inspection, if we have reasonable grounds to do so (for example, this may be as a result of a whistleblower alert). * See planning tool and ‘keep records’

29. Declaration of compliance (registration) Employers must complete a declaration of compliance (registration) The deadlines are: five months after the staging date and two months after every re-enrolment date. Employers may receive a penalty fine if they do not complete their declaration on time. Employers will need to provide certain details, for example: which pension schemes were used to comply with the duties, and the number of eligible jobholders automatically enrolled into each scheme. All postponements applied at the staging date must have come to an end before the declaration can be completed. You can start the online process early and partially complete your declaration.

30. Any questions?

31. Useful links Staging date tool:www.tpr.gov.uk/employers/tools/staging-date.aspx Planning tool:www.tpr.gov.uk/planner The essential guide to automatic enrolment:www.tpr.gov.uk/employers/e-brochure/index.html Ourdetailed guides for employers and pension professionals:www.tpr.gov.uk/pensions-reform/detailed-guidance.aspx Information about declaration of compliance (registration):www.tpr.gov.uk/declaration Lettertemplates for employers:www.tpr.gov.uk/employers/letter-templates-for-employers.aspx

32. 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

33. Useful links continued… 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 Automatic enrolment – are you ready? www.tpr.gov.uk/press/webinar-automatic-enrolment-are-you-ready.aspx Automatic enrolment registration. www.tpr.gov.uk/press/webinar-automatic-enrolment-registration.aspx

34. Resources 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

35. 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.

36. Additional slides

37. DC self certification during phasing period

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

39. 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

40. Is Eddie a worker? Eddie is a self employed graphic designer. He works regularly for a company, Acme Workshops Ltd. His role is unique. He designs (and, if necessary, prints on his own equipment) all the flyers and magazine ads. He also designs and updates their website and forum. Eddie is very important to Acme Workshops’ marketing strategy. It is a nightmare when Eddie is too busy working for other customers, because his contract with Acme does not permit him to send a replacement. Eddie works unsupervised and, generally, he works from home, but sometimes he works in the offices of Acme Workshops. Eddie invoices Acme Workshops at the end of each campaign design and guarantees the quality of his material.Question 1 - Should Acme Workshops consider Eddie to be their worker?

41. Is Eddie a worker?  Eddie is a self employed graphic designer. He works regularly for a company, Acme Workshops Ltd. His role is unique. He designs (and, if necessary, prints on his own equipment) all the flyers and magazine ads. He also designs and updates their website and forum. Eddie is very important to Acme Workshops’ marketing strategy. It is a nightmare when Eddie is too busy working for other customers, because his contract with Acme does not permit him to send a replacement. Eddie works unsupervised and, generally, he works from home, but sometimes he works in the offices of Acme Workshops. Eddie invoices Acme Workshops at the end of each campaign design and guarantees the quality of his material.Eddie cannot reasonably be considered a worker, as: • i) he is not an employee ii) he sometimes uses his own equipment • iii) he works unsupervised and iv) he guarantees the quality of his work

42. Is Georgina a worker? Georgina is a self employed IT professional who works full time for Acme Workshops Ltd. Georgina supports Acme Workshops’ in house payroll system and is very important to Acme Workshops and no one else has the expertise to do her work when she’s on holiday. Georgina works in Acme Workshops’ payroll team, alongside Acme Workshops’ own employees in their offices, but sometimes she is allowed to work from home. Georgina invoices Acme Workshops at the end of each month based on the number of days she has worked. Should Acme Workshops consider Georgina to be their worker?

43. Is Georgina a worker?  Georgina is a self employed IT professional who works full time for Acme Workshops Ltd. Georgina supports Acme Workshops’ in house payroll system and is very important to Acme Workshops and no one else has the expertise to do her work when she’s on holiday. Georgina works in Acme Workshops’ payroll team, alongside Acme Workshops’ own employees in their offices, but sometimes she is allowed to work from home. Georgina invoices Acme Workshops at the end of each month based on the number of days she has worked. Should Acme Workshops consider Georgina to be their worker? Georgina can reasonably be considered a worker, because: • she is supervised by Acme (needs permission to work at home) • she works in their offices (uses their office equipment and supplies), and • she is paid a daily rate (the completed work is not guaranteed)

44. 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

45. 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

46. Opt-in – 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

47. Opt-in – 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)

48. 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

49. 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