Blake Lapthorn and Hays Recruitment held a joint seminar focusing on the choices, costs and strategic opportunities of auto enrolment on 25 April 2013 at Blake Lapthorn's Oxford office.

1. Blake Lapthorn and Hays –
auto enrolment – helping you plan,
prepare and cope with the challenges
The what, why, how and when
The practicalities and the opportunities
25 April 2013
Seacourt Tower, Oxford

2. Auto enrolment – helping you plan, prepare and
cope with the challenges
Welcome
Housekeeping
The book of the film
What we will cover today and what we will not cover
Participate
Challenge
Enjoy
Adrian Lamb
Blake Lapthorn

3. Is auto enrolment -

4. What we will not cover
today (because we
covered it last time)
The basics
The employment
considerations
Communications – the what,
when and how
The HR issues and
challenges
What we will cover today
What it will cost
The challenges for systems
The different vehicles
The pros and cons and trust
and contract based
arrangements
The strategic opportunity
Auto enrolment – helping you plan, prepare and
cope with the challenges

5. 8.30 am to 10.30 am
Introduction and recap
Costs, complications and compliance – Shaun Thompson,
Blake Lapthorn
The different options and vehicles – Linda Ward, Atkin &
Co.
The strategic challenge and the opportunity – David Miles
and Adrian Lamb, Blake Lapthorn
Open forum/Q&A/Summing up
Auto enrolment – helping you plan, prepare and
cope with the challenges

6. C =
Compliance
Costs – hard and soft?
Complexity
Contributions
Communications
Contractual or statutory?
Contract or trust based?
Coming soon?
Categorisation?
Capacity?

7. Who does it apply to?
Employers and workers
An employer is defined as anyone who has a contract with
a ‘worker’.
An employer must identify whether they have a ‘worker’ –
in some cases this may not be clear.
As a minimum, an employer with one or more worker(s)
will need to register with The Pensions Regulator.
It is important to understand the different categories of
worker –and the duties they will have in respect of each
category.

8. What does an employer have to do?
Automatic enrolment
Opting in, joining and contractual enrolment
Managing opt outs
Providing information and communicate
Make/maintain employer contributions
Keep records about their workers and the pension scheme
Keep track of ages and earnings

9. Jobholders and entitled workers
Eligible jobholders
– Workers
– Aged between 22 and SPA
– Earning over income tax personal allowance threshold
(currently £9,440 from 6 April 2013)
Ineligible jobholders
– Workers
– Aged between 16 and 22 or SPA and 74 who earn over
income tax personal allowance threshold; or
– Any age who earn between NI Lower Earnings Limit
(£5,668) and income tax personal allowance threshold
Entitled worker
– Any age with earnings below NI Lower Earnings Limit
Know your obligations in relation to each category and
watch out re opt outs and opt ins!

10. When and how – the basics?
Do you know your staging date?
Communicate at the right time to the right person
Enrol the right workers at the right time
Pay the right contributions at all times

11. What systems do I need for administration?
Age + earnings = category

12. Source: Making auto enrolment work, October 2010
Costs to employers can be divided into two distinct elements. First, the contribution to employer
of providing the three per cent minimum contribution to employees who remain in pensions saving.
These costs represent a transfer to the employee, rather than a pure cost in economic terms. By contrast,
administrative cost – for example, the cost of setting up a pension scheme, automatically enrolling
employees, calculating and deducting contributions, and registering with The Pensions Regulator –
represent a true economic cost.
Table 3.6: Administrative costs per person automatically enrolled split by firm size
Sample Employer Costs

13. Helping meet auto enrolment obligations
Communications
to employees
Report to The
Pensions Regulator
Employee
Ideal solution
• Holds employer specific rules
• Determines contributions
• Records opt-in/opt-out status
• Direct interface with provider(s)
• Produces employee communications
• Produces MI and audit trail
Payroll file
Employers
Provider A (NEST/People’s?)
Provider B (main?)

14. Auto enrolment - communication requirements
Prescribed notices must be given to employees within a
prescribed deadline
Notice to employees already in a qualifying scheme
Notices to eligible, non-eligible jobholders and entitled
workers
Postponement notices

15. Blake Lapthorn and Hays –
auto enrolment – helping you plan,
prepare and cope with the challenges
The what, why, how and when
The practicalities and the opportunities
25 April 2013
Seacourt Tower, Oxford

16. Auto enrolment - focusing on the
choices, the costs and the strategic
opportunity
Shaun Thompson
Solicitor
Pensions Team, Blake Lapthorn
shaun.thompson@bllaw.co.uk

17. Auto enrolment – a quick recap of the basics
Applies to all UK companies!
Workforce is split into eligible and non eligible jobholders
and entitled workers
Different obligations in relation to each category of worker
Eligible jobholders (and non eligible jobholders who
choose to opt in) must be enrolled in an “auto enrolment
scheme”

18. What is an auto enrolment scheme?
Must be a “qualifying scheme”
Can be an occupational or personal pension scheme
Must not contain barriers to entry

19. Qualifying schemes – overview
Employer’s choice (subject to meeting minimum
standards)
Can be an occupational scheme or personal pension
scheme
Can use more than one arrangement
Opportunity to streamline/harmonise your pension
arrangements

20. Using an existing pension scheme
Will the scheme provider allow you to use the scheme for
auto enrolment?
Vital to check and ensure compliance with the minimum
quality requirements
Accrual rate/contribution rates
Access terms – watch out for any waiting period or
requirements to provide any information or take steps to
become a member!

21. DB schemes
Contracted out DB schemes – automatically compliant
Contracted in DB schemes – must satisfy the “test
scheme standard”
Test scheme standard = accrual rate of 1/120th, maximum
of 40 years’ pensionable service
Employer/actuary must certify compliance
Modified requirements in respect of CARE/cash balance
schemes

22. DB schemes - transitional period
Optional transitional period employers can use – ends on
30 September 2017
Employer can delay auto enrolment for a specific group of
jobholders
Those jobholders must have been existing employees
who were able to join the DB scheme and are still eligible
to do so
Prescribed notice must be given
Employees can opt in!
If you close your DB scheme, you must provide another
auto enrolment scheme!

23. DC schemes - standard
Employer must make minimum contribution of 3% of a
jobholder’s qualifying earnings in 12 month period
Total contributions must be a minimum of 8% of qualifying
earnings
Jobholder must make up shortfall (if any) between
employer’s contribution (subject to 3% minimum) and 8%
Qualifying earnings = gross earnings between £5,668 and
£41,450

24. DC schemes – self certification
Allows an alternative quality requirement to be used
Key advantage is that a different definition of pensionable
earnings can be used
Tier 1 – 9% (4% employer): pensionable earnings = basic
pay
Tier 2 – 8% (3% employer): 85% of earnings must be
pensionable
Tier 3 – 7% (3% employer): 100% of earnings must be
pensionable
Employer must certify compliance with one of these tiers

25. Contribution rates and phasing in
Applies to DC schemes
Applicable to both standard DC schemes and self
certification DC schemes
1% employer/2% total from staging date until 30
September 2017
2% employer/5% total between 1 October 2017 and 30
September 2018
3% employer/8% total from 1 October 2018

26. Salary sacrifice
Can be used for auto enrolment – HMRC has allayed
concerns about this
An employer cannot require a jobholder to participate in a
salary sacrifice arrangement
Jobholders can be given the option as to whether to be
enrolled on a salary sacrifice basis
DC schemes – a jobholder’s post sacrifice salary must be
used for purposes of assessing whether minimum
contribution rates are met

27. Other options
Master trusts – becoming increasingly popular
NEST – obliged to take on business

28. Questions?

29. Auto enrolment - focusing on the
choices, the costs and the strategic
opportunity
Shaun Thompson
Solicitor
Pensions Team, Blake Lapthorn
shaun.thompson@bllaw.co.uk

30. Auto enrolment:
choosing a scheme
Linda Ward
Actuary, Atkin & Co
0121 506 8200
Linda.Ward@atkin.uk.com
Linda Ward
Actuary, Atkin & Co
0121 506 8200
Linda.Ward@atkin.uk.com

31. Overview
‐ Doing your ‘homework’
‐ How to choose a scheme
‐ Case studies

32. I is doing
my
homework
OK…
Photo from flickr by Apium

33. Background ‘homework’
Age <£5,668 £5,668 to
£9,440
> £9,440
16 to 21 Entitled
worker
Non‐eligible
jobholder
Non‐eligible
jobholder
22 to SPA Entitled
worker
Non‐eligible
jobholder
Eligible
jobholder
SPA to 74 Entitled
worker
Non‐eligible
jobholder
Non‐eligible
jobholder
Cost modelling
Employee Employer
Staging date to
September 2017
1% 1%
October 2017 to
September 2018
3% 2%
From October 2018 4% 3%
Minimum contributions

34. Overview
‐ Doing your ‘homework’
‐ How to choose a scheme
‐ Case studies

35. For auto enrolment, the existing scheme must
meet the requirements of a ‘Qualifying Scheme’
All employeesAll employees
Decision 1: Use current scheme(s) to auto enrol?
Senior
employees
Existing
members

36. Decision 2: To NEST or not to NEST?
NEST is the default auto
enrolment option unless you
notify the Pensions Regulator
otherwise

37. Decision 3: Trust‐ vs contract‐based?

38. Decision 4: Choose a provider

39. Overview
‐ Doing your ‘homework’
‐ How to choose a scheme
‐ Case studies

40. Photo from flickr by myfuture.com

41. Case study 1: Elderly care charity
Background ‘homework’:
• 900 employees
• Existing generous GPP: 10% employer contribution
• 30% take up in current scheme, low charges
• Only affordable option for remaining employees is statutory
minimum contribution (3% after staging)
Choosing a scheme:
• Simplest option: introduce new category to existing scheme,
but provider would increase charges
• Alternatives considered: NEST, NOW, The People’s Pension
• Final decision: NEST selected for new members only

42. Photo from flickr by Julien Haler

43. Case study 2: Small packaging manufacturer
• 40 employees – staging date 1 August 2015
• Existing occupational scheme (historically DB, now DC for
active accrual), charges met by employer
• Contractual enrolment, high take‐up
• Employer wants to transfer costs to employees – bringing
forward auto enrolment and looking at new providers
• Transfer deferred members too? Points to trust‐based
option
• Issues with contractual enrolment: consultation in progress
that may simplify

44. Overview
‐ Doing your ‘homework’
‐ How to choose a scheme
‐ Case studies

45. About Atkin & Co
Established in 1992, Atkin & Co is a
specialised, independent firm built
on a strong team of high calibre
individuals.
We provide full pension scheme and
consultancy services in a dynamic,
creative and cost effective way.
We specialise in providing services to small and medium schemes and
employers: we recognise that they usually have similar problems to larger
schemes and employers, but without the same resources to throw at them
and therefore need more innovative and collaborative solutions.
Please visit www.atkin.uk.com for more information
or call Linda Ward on 0121 506 8200.

46. Auto enrolment:
choosing a scheme
Linda Ward
Actuary, Atkin & Co
0121 506 8200
Linda.Ward@atkin.uk.com
Linda Ward
Actuary, Atkin & Co
0121 506 8200
Linda.Ward@atkin.uk.com

47. Auto enrolment – strategic fit
David Miles
HR consultant, Employment team
Blake Lapthorn
david.miles2@bllaw.co.uk

48. Is your AE plan coherent?
Employer
Brand
Reward
Strategy
Talent
Management
Culture
Employees
Needs
Business
Strategy
Legal
obligations

49. Drivers for Change
Attraction
and
retention of
High
performers
Employees
want fair
remuneration
Cost Control
Competitive
Advantage
Legal
obligations

50. Reward strategic fit
Employer
Brand
Learning &
development
Legal
Obligations
Talent
Management
Culture
Employees
Needs
Business
Strategy
Reward
Strategy

51. Reward Strategy Components
Salary
sacrifice
Pensions
Merit Pay
Non Financial
Rewards
Performance
Pay
Bonus
Share
Schemes
Long Term
Incentives
Basic Pay
Reward
Strategy

52. Some Thoughts
Is it time for a reward strategy?
Will AE be a missed opportunity for review of reward?
Have you got time & resources for review?
Will AE add to your costs?
Will you make welcome or unwelcome changes elsewhere
to compensate?
Do you measure the cost and impact of reward?
Will you measure the cost and impact of AE?

53. Auto enrolment – strategic fit
David Miles
HR consultant, Employment team
Blake Lapthorn
david.miles2@bllaw.co.uk

54. Auto enrolment
– the bigger picture and the strategic
opportunity
Adrian Lamb
Pensions director, Pensions team, Blake Lapthorn
adrian.lamb@bllaw.co.uk

56. Some obvious (and not so obvious) questions and
comments
What does it have to do with a pension?
If it has little to do with pensions what does it have to do
with?
The bare minimum will not be adequate for individuals but
what about employers.
Is auto enrolment just a precursor to more tax or NI?
Is it right for everybody?
Lots of choices, lots of work, but limited resources and
possibly limited time.
Big picture should not be ignored.
What would success look like?
Auto enrolment – helping you plan, prepare and
cope with the challenges

57. The facts and some issues
If you are paying less than 3% for all your workers now it
could cost you more
There is lot of work at the outset and ongoing – time and
resources
Will scrapping contracting out affect any of this?
Whose responsibility is it?
What is your room for manoeuvre?
Costs may go up more in the future
Auto enrolment – helping you plan, prepare and
cope with the challenges

58. Auto enrolment
Salary sacrifice OK?
Beware inducements
How will this fit with other benefits and how will it fit with a total
reward/flexible benefit approach?
“Your total remuneration for the [your role] will be £30000 but
– you will have the option to exchange some of this amount for
other benefits, including private medical insurance for yourself
and your dependants; additional life assurance, extra holiday, etc.
– in accordance with our legal obligations we will automatically
reduce this amount by 4% and we will automatically enrol you into
the [XYZ Group Personal Pension Scheme]. Please note that the
Company is also required to pay 3% of your pay from time to time
into that scheme and you are able to pay more than 4% but you
cannot pay less unless you opt out.”
Could flex pricing be seen as an inducement?

59. Why Salary Exchange?
33.9% 17.7%
*Assumes net take home pay remains the same, Employer 100% NI reinvested
Impact less if Employer retains NI saving

60. To the different stakeholders - to HR - to Finance?
Compliance (no fines and no complaints)?
A more engaged workforce?
Does it depend on where you are coming from?
Auto enrolment – helping you plan, prepare and
cope with the challenges
What would success look like?

61. An open or recently closed DB Scheme?
Nothing?
Minimal GPP/stakeholder
Reasonable DC
Segmented workforce – some in closed DB, some in DC,
some in nothing
Auto enrolment – helping you plan, prepare and
cope with the challenges
Where are you coming from?

62. Manufacturer/Engineering - recently closed DB (from full
open) so costs already there – GPP ranging from 3%/8%
to 7%/12% designed – so no extra costs
Charity – GPP – with latest influx from DB scheme closed
to new entrants some time ago – so GPP up and running
– 3%/11% upwards – minimal compliance issues except
for initial eligibility – so minimal extra “hard” costs
Small charity with nothing at present – up to 3% plus lots
of extra work
Auto enrolment – helping you plan, prepare and
cope with the challenges – some more examples

63. Auto enrolment
– the bigger picture and the strategic
opportunity
Adrian Lamb
Pensions director, Pensions team, Blake Lapthorn
adrian.lamb@bllaw.co.uk

64. Auto enrolment - making it all fit together
HR
Systems
Payroll
Provider

65. Are you an employer/do you have workers?
Do you know your workers – eligible, non-eligible and
entitled?
Do you know your staging date
– 1 September 2013 for 1250 to 1999 employees
– 1 April 2015 for 50-53 employees
– so next 2 years will catch a very large number of workers
and employers
Do you know your pay cycle(s)?
How will you cope with variable earnings for low and high
earners?
Will there be capacity when you are ready to go?
Auto enrolment – helping you plan, prepare and
cope with the challenges

66. What about your contracts, terms and conditions, etc?
Are you ready for all the communications you will need –
there are lots!
Who will do all of this work? How will you cope?
Do you have a plan?
Are you prepared?
Have you started?
Auto enrolment – helping you plan, prepare and
cope with the challenges

67. Start now or soon – probably need at least 12 months
Nominate a point of contact
Assemble project team
Know your staging date
Develop a plan
Assess your workforce
Engage with your suppliers and advisers
Auto enrolment – helping you plan, prepare and
cope with the challenges
Menu/to do list (if you don’t have one already)

68. Automate what you can
Review your current arrangements
Communicate to ALL your workers
Automatically enrol
Register
Keep records
Contribute
Consider going early if capacity is an issue?
…menu/to do list continued

69. Auto enrolment – helping you plan, prepare and
cope with the challenges
Menu/to do list (if you don’t have one already)
Employer Action Plan
Audit
Data cleanse
Do you meet the quality scheme minimum standards?
What is the cost impact? Budget accordingly
What do your contracts say?
What information can you provide? Do you want to offer
advice to employees?

70. Do you want to let your employees know what you are
planning?
Consultations as appropriate if schemes need updating
Communication is key
Migrate with salary reviews?
What would success look like?
…Employer Action Plan continued

71. Feedback
Continue discussions over coffee
Thank you for coming
Auto enrolment – helping you plan, prepare and
cope with the challenges