Here's a copy of our presentation from the free breakfast briefing we held in January 2014. Auto Enrolment is mandatory legislation to all companies in the UK, starting from October 2012. If you have questions that need answering or would like us to help you with this process, please get in touch. 01302 341 344.

1. Automatic Enrolment
Creating a road map for your
business
Supporting you
every step of the way
John Carter DipPFS

2. Roadmap
•Background – Why Auto Enrolment
•Employer Duties
•Contribution options
•Admin Duties
•Middleware
•Staff Communication

3. Why Auto Enrolment?

4. People are living longer
Historic and projected life expectancy at age 65 UK
(years)
Men
Women
18
14
1981
23.7
21
2010
Source: Office for National Statistics, Pension Trends Chapter 2, 16 February 2012.
28.3
25.9
2051

5. It’s unaffordable
Total projected expenditure on state pensions and related
benefits, 2011/11 to 2050/51
£billions, 2011/12 prices
250
196
142
84
92
97
2010/11
2015/16
2020/21
2030/31
Source: Office for National Statistics, Pension Trends Chapter 5, 27 October 2011.
2040/41
2050/51

6. Inflated Retirement Expectations
• Basic State Pension is currently?
£110.15 per week (£5727.80 pa)
• For a £20K Personal Pension income
(Start Saving at 40)?
£799 per month
* assuming 7% growth and current annuity rates

7. Employer Duties

8. Employer Duties
• Implement an Auto Enrolment compliant
pension scheme
• By the staging date set by the DWP
• Maintain the scheme in accordance with
applicable legislation

9. EASY!!

10. The Rules

11. Assessing worker type
The different types of worker
Age (inclusive) 
22 – SPA
16 - 21
Earnings
SPA - 74
Under lower qualifying
earnings threshold £5,668 or less
Entitled worker – can join
More than £5,668 up to
£9,440
Non-eligible jobholder – can opt-in
Over automatic enrolment
earnings trigger - £9,440
(up to £41,451 for band
earnings)
Non-eligible
jobholder – can
opt in
Eligible jobholder
AUTOMATIC
ENROLMENT
* Automatic Enrolment (Earnings Trigger and Qualifying Earnings Band) Order 2012
Non-eligible
jobholder – can
opt in

12. 1,200,000
Employers
11,000,000
Employees

13. When will it happen?
Voluntary start
“Test tranche”
<30
250 or more
July
2012
Oct
2012
249
to 50
April
2014
Feb
2014
49
to 30
April
2015
Aug
2015
June
2015
<30 and
no PAYE
Oct
2015
Jan
2016
New
employers
Apr 2012 to
Sep 2017
May
2017
Apr
2017
Feb
2018

14. It’s OK, I can wait until my staging date!
Capacity Crunch
• Provider ability to respond?
• Availability of advice?
• Timeframe for set-up
• Budget Planning?

15. Staging profile to
May 2015
Source: payrollworld.com

16. And in real numbers ……..
Source: TPR / PW

17. Contribution Options
& Scheme Design

18. Contribution options?
 Defined Contribution – will be phased in to:
8% ‘Banded Earnings’ total
3% ‘Banded Earnings’ employer minimum
Jobholder can be required to make up the difference
 ‘Qualifying Earnings’
 Between £5,668 - £41,450*
 Includes overtime, SSP, SMP etc
* Automatic Enrolment (Earnings Trigger and Qualifying Earnings Band) Order 2012

19. Band Earnings
 Earnings thresholds:
Earnings £
£41,4501
Contributions paid
£9,4401
£5,6681
Not auto-enrolled
0
Source: Automatic Enrolment (Earnings Trigger and Qualifying Earnings Band) Order 2012

20. Phasing
Transitional
Duration
Employee
Total min
contribution
Period
Employer min
Pays
contribution
Phase 1
Employer's staging date
to 30 September 2017
1%
1%
2%
Phase 2
1 October 2017 to
30th September 2018
2%
3%
5%
1 October 2018 onwards
On-going
3%
5%
This is for the default “banded earnings” certification. Other certifications will vary.
Contractual entitlements are not considered in this example.
Source: Making automatic enrolment work, Report for the DWP October 2010
8%

21. Contribution options
3 additional certification options:
 A minimum of 9% contribution of pensionable pay (including at least
4% employer contribution)
 A minimum 8% of pensionable pay (3% employer) provided
pensionable pay constitutes at least 85% of the total pay bill
 A minimum 7% contribution of earnings (3% employer), provided that
100% of total pay is pensionable
OR
• “Qualifying Scheme” - The scheme already meets all of the AE requirements
Source: Making automatic enrolment work, Report for the DWP October 2010

22. Contribution options
• 3 acceptable definitions:
DEFAULT
1
2
£50,000
3
Total earnings
Basic earnings
£41,450
<15%
Earnings £
>15%
Basic earnings
8%
7%
8%
9%
£9,440
£5,668
0
1. If the definition of pensionable pay is total earnings then a 7% contribution rate is acceptable
2. If total pensionable earnings equate to at least 85% of the total wage bill, then 8% is acceptable
3. If pensionable earnings are less than 85% of total earnings then a 9%
contribution is acceptable

23. Salary Exchange/Sacrifice
£100 net employee contribution
Pension Exchange Amount
Basic Rate
£147.06
Employer’s NI Saving
£20.29
Total Invested
??????
Pension Exchange Amount
Higher Rate
£172.41
Employer’s NI Saving
£23.79
Total Invested
??????

24. Potential Savings could offset the
costs …………
30 employees
@ £20.29 NI saving per month
Monthly Payroll Saving
=
£608.70
Annual Payroll Saving = £7304.40

25. SEGMENTATION
Directors
Sales People
Generic Provider
9% Basic Pay
General Staff
See
Generic Provider (People’s
Pension / NEST/Insurer)
8% Banded Earnings
Senior
Managers
GPP
7% Total
Pay

26. Admin Duties

27. Admin duties
Employers MUST
Employers MUST NOT
Auto enrol and re-enrol/deduct payments
Register/re-register their scheme
Provide information to eligible and noneligible jobholders
Discourage membership
Give jobholders the opt-out form
Encourage opt-outs
Provide information to scheme/provider
Use ‘Prohibited recruitment conduct’
Process opt outs/make refunds
Give advice
Keep records
Sources: Pensions Act 2008, The Occupational and Personal Pension Schemes
(Automatic Enrolment) Regulations 2010.

28. Or else...
Stage 1 - Warning
Compliance/unpaid contribution notice
Fixed penalty - £400
Stage 2 – ‘Wake up call’
Escalating penalty
Stage 3 – Persistent offenders
Workers
1-4
5-49
50-249
250-499
500+
Sources: Pensions Act 2008, Chapter 2, The Occupational and Personal Pension Schemes
(Automatic Enrolment) Regulations 2010.
For professional advisers only
Penalty per day
£50
£500
£2,500
£5,000
£10,000

29. 11 Months in and changes already ………..
• Aligning assessment pay reference period with tax periods (RTI?)
• Defining pay reference periods for quality assessment
• Consistency of contribution payment deadlines for all joiners
• Jobholders opting out “before” Auto Enrolment
• Clarification of the opt-out notice, and extension of the joining window
• Test scheme standard for DB schemes, and quality requirements
• Exclusion of certain workers from Auto Enrolment
• “Other possible options” for employers with “good” pension schemes

30. Middleware

31. Middleware
Integrated software to interface with;
• Payroll
• HR
• Pension provider
• Employees
Purpose to assess in each payment period eligible
employees, notify new auto-enrolment joiners by
age, salary, new starters, staff that have opted out
and need re-enrolling after 3 years etc.

32. Pension
New Joiner Data
Contribution Data
Opt Out
Indicators
Salary Data
Middleware
Platform
HR
Deductions
Salary Sacrifice
New Hires
Re-Joiners
Scheme
Decisions
Updates
Payroll
Opt-Out
Re-join
Employees
Valuations

33. MIDDLEWARE CHOICES
Option 1
Option 2
Option 3
• Generic Package
• Bespoke Package
• Bespoke Package
• Insurer Supplied
• Auto Enrolment
Middleware
• Auto Enrolment
Middleware
• Staff Intranet
• Staff Intranet
• Scheme
Segmentation
• Scheme
Segmentation
• Full Reporting
• Full Reporting
• Basic AE
Middleware
• Online Payslips
• Lifestyle Benefits

34. RANGE OF SOLUTIONS
OPTION 1
OPTION 2
OPTION 3
• Bespoke Offering
• Bespoke Offering
• Generic Offering
• Auto Enrolment
Integration and
Management
• Auto Enrolment
Integration and
Management
• Insurer Supplied
• Full Employee
Benefits Package
• Staff Intranet
• Online Payslips
• Staff Intranet
• Lifestyle Benefits
• Auto Enrolment
Integration and
Management
• Tied to Insurer
and potentially
dependent upon
segmentation

36. Communication

37. Communication!
• Implementers
– Payroll/Management/HR/Finance etc
• Employees
– Surgeries / One to Ones
– Member packs
– Reviews / Retirement Advice
• Insurer/schemes

38. Official Suggested Timelines
Source: TPR

39. Summary
Step 3 – Run
Step 1 – Design a Step 2 – Implement
the scheme in the
the changes
solution for your
most efficient way
effectively
business

40. Staging Dates
2,000 – 2,999 members
1st August 2013
1,250 – 1,999 members
1st September 2013
800 – 1,249 members
1st October 2013
500 – 799 members
1st November 2013
350 – 499 members
1st January 2014
250 – 349 members
1st February 2014
From (inc.)
To (inc.)
50 to 249 members
1st April 2014
1st April 2015
Test tranche for less than 30 members
1st June 2015
30th June 2015
30 to 49 members
1st August 2015
1st October 2015
Less than 30 members
1st January 2016
1st April 2017

41. Updates and Social Media
John Carter
ProAktive
@ProaktivePeggy
@ProaktivePeople
ProAktive House
Sidings Court
White Rose Way
Doncaster
DN4 5NU
01302 341344
John Carter 07725 258283
johncarter@proaktive.co.uk
Proaktive is a trading name of Atkinson Smith (Financial Services) Ltd. Authorised and Regulated by the FCA

42. Any Questions?