Auto Enrolment: Part one: Employer duties

FEB14ED1 These slides remain the property of The Pensions Regulator and their content should not be altered on reproduction.
Part 1: Employer duties
Neil Esslemont
Head of Industry liaison team
Rebecca Woodley
Industry liaison team
February 2014
An introduction to
automatic enrolment
The information we provide is for guidance only and should not
be taken as a definitive interpretation of the law.

Scope
Employer duties
• This is the first part of the Introduction to automatic enrolment module.
• No prior knowledge is needed.
• This module will:
– introduce you to the employer duties, and
– explain the terminology used.
• You may also wish to view these modules :
– Part two of Introduction to automatic enrolment - Getting started
– Staging dates
– Who is a worker?

Contents
• Why is automatic enrolment being introduced?
• When do the employer’s duties start?
• What are the employer’s duties?
• Review of module
• What next?
• Glossary

• 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.
Why is automatic enrolment being introduced?

An introduction to automatic enrolment
When do the employer’s duties start?

Staging
• The employer duties apply to each employer from their staging date:
– the duties apply to all of the employer’s workers from that date.
• The staging date is based on the size of employer’s PAYE
scheme(s) as of 1 April 2012:
– any subsequent changes in PAYE size or usage have no
effect on the staging date.
• Generally, larger employers will stage before smaller ones:
– new employers* will go last, from May 2017.
Oct 2012 May 2017April 2014 June 2015
Large
employers
Medium
employers
Small/micro
employers
New*
employers
Feb 2018
*Employers that did not exist
(or were not using a PAYE)
as of 1 April 2012.

Staging profile (volumes of employers)

An introduction to automatic enrolment
What are the employer’s duties?

Automatic enrolment legislation gives employers a duty to:
 automatically enrol all eligible jobholders
 communicate to workers providing timely and appropriate information
 allow non-eligible jobholders to opt in and entitled workers to join
 manage opt outs within the opt-out period and promptly refund contributions
 automatically re-enrol all eligible jobholders every three years
 complete registration with The Pensions Regulator
 keep records, and
 maintain 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 the recruitment process
Overview of legal duties and safeguards

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

Who are your workers?

Qualifying earnings
Age range
16-21 22-SPA* SPA*-74
Under £5,668†
pa Entitled Worker
Between £5,668 pa
and up to £9,440†
pa
Non-Eligible Jobholder
More than £9,440†
pa
Non-Eligible
Jobholder
Eligible
Jobholder
Non-Eligible
Jobholder
* SPA = State Pension Age
** Figures for 2014/15
Entitled workerUnder £5,772** pa
Between £5,772 pa
and up to £10,000** pa
Non-eligible jobholder
More than £10,000** pa Non-eligible
jobholder
Non-eligible
jobholder
Eligible
jobholder
Employer must
automatically enrol
eligible jobholders into an
automatic enrolment
pension scheme
Can request to
join a pension
scheme
Non-eligible
jobholders can
opt in to an
automatic
enrolment pension
scheme
Worker categories

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 must be 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 some workers again every three years.

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

Pension schemes types
• Pension schemes can be either:
– defined contribution (DC) eg ‘money purchase’
– defined benefit (DB) eg ‘final salary’ or ‘career average’, or
– hybrid: a mix of DB and DC.
• An automatic enrolment scheme must be used for:
– the automatic enrolment of eligible jobholders, and
– the enrolment of any jobholders who ‘opt in’.
• 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.

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

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.
• Can be from one day up to maximum of three months – and this can vary
by individual.
• The employer must notify any postponed worker within six weeks of the start
of postponement (or within one month, if the start date is before 1 March
2014).
• 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 or, for those workers not eligible at that point, monitor
them each future pay period.

Opting in and joining

‘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 not give 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).

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 (or within one month if
the assessment date is before 1 March 2014).
• 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’

Re-enrolment

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’

Declaration of compliance (Registration)
• Employers must complete the declaration* process to confirm they have
complied. (* see planning tool ‘registration’)
• For employers who stage from 1 January 2014 onwards, the deadlines are:
– five months after the staging date and
– two months after every re-enrolment date (for employers staging
in 2012 and 2013, the deadline after staging is four months).
• Employers may receive a penalty fine if they do not complete registration
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 registration can be completed.
• You can start the online process early and partially complete your declaration.

Question 1: Who does the law make responsible for carrying out the duties?
Answer: The employer (even if some actions are delegated to a third party).
Question 2: Who must be enrolled, if they request to opt in?
Answer: A non-eligible jobholder (at any time) or an eligible jobholder
during postponement.
Question 3: Only employees are included in the automatic enrolment legislation.
True or false?
Answer: False. Duties may apply to other workers, not just employees
(eg personal services workers).
Questions and answers

Question 4: If an eligible jobholder is an existing member of a non-qualifying
pension scheme, what will the employer need to do?
Answer: They could stay in the non-qualifying scheme but this would not
meet the employer duties. The employer could see if the existing
scheme can be made qualifying, and if it can, make the changes
and continue to use it. Alternatively, the employer could enrol
them into a new automatic enrolment scheme.
Question 5: What happens if a worker sends in an opt-out notice before
their opt-out window has started?
Answer: It cannot be accepted. The opt-out window will not open until they
are an active member of the pension scheme and the employer
has issued the enrolment letter.
Questions and answers continued…

Question 6: How long can the assessment of workers be postponed?
Answer: Between one day and three months.
Question 7: If postponement is used, what three duties still apply?
1. Issue postponement notices, within six weeks (or within one
month for assessments before 1 March 2014) - to all
postponed staff (including new joiners)
2. Enrol any jobholders who opt in during postponement into an
automatic enrolment pension scheme
3. Enrol any entitled workers who want to join a pension scheme.

Question 8: What is the deadline to complete the declaration of
compliance (registration) after staging?
Answer: Five months after the staging date for those staging
from January 2014.
Question 9: Who do employers need to write to at staging
(eg send a letter or email)?
 Workers not in a pension scheme?
 Active members of a qualifying pension scheme?
 All workers?
 Eligible jobholders being automatically enrolled?

What next?

Know
your staging
date
Who is a
worker?
Reviewing
your pension
schemes
Employee
safeguards
Assessment
and automatic
enrolment
Communicate
to your workers
Postponement
and
transitional
period
Joining/
opting In
Record-
keeping/
Contribute
to your
pensions
Opting
out
Contractual
versus
Statutory
enrolment
Declaration of
compliance
(register)
Now Between now and staging At staging and beyond
Automatic enrolment
Introduction
to automatic
enrolment
Part 1:
Employer
duties
Part 2:
Getting
started

Useful links
• Modules: Introduction to automatic enrolment, Staging dates and Who is a worker?
www.tpr.gov.uk/help-clients
• Staging date tool:
www.tpr.gov.uk/employers/tools/staging-date.aspx
• Planning tool:
www.tpr.gov.uk/planner
• Letter templates for employers:
www.tpr.gov.uk/employers/letter-templates-for-employers.aspx
• Information about registration:
www.tpr.gov.uk/employers/registration.aspx
www.tpr.gov.uk/docs/automatic-enrolment-online-registration-checklist.pdf
• Our detailed guides for employers and pension professionals:
www.tpr.gov.uk/pensions-reform/detailed-guidance.aspx

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

We’d appreciate your feedback
on this presentation
https://www.surveymonkey.com/s/TPRBoxSetFeedback

We are here to help
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www.tpr.gov.uk/contact-us.aspx
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Thank you
The information we provide is for guidance only and should not
be taken as a definitive interpretation of the law.

Glossary

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’)

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)

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)

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

Auto Enrolment: Part one: Employer duties

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