This document provides guidance for accountants and their clients on preparing for auto enrolment workplace pension reforms. It outlines the seven steps employers must take, including knowing their staging date, assessing their workforce, reviewing existing pension arrangements, communicating changes, automatically enrolling eligible workers, registering with the Pensions Regulator, and contributing to workers' pensions. It also discusses key considerations like minimum contribution rates, categorizing workers, dealing with personal services contractors, using postponements, opt outs and refunds, and the consequences of non-compliance, which can include fines. The presentation aims to help accountants support their clients in meeting their new auto enrolment duties.
Preparing for Auto Enrolment - Guidance for Accountants
1. Preparing for Auto Enrolment
Guidance for Accountants and
their clients
David Wandless
Professional Services Trainer
Accountants' Division
2. Preparing for Auto Enrolment
Agenda
Welcome & Introduction
• An introduction to Workplace Pension Reform
• The seven steps to Auto Enrolment
• Postponements and on-going reviews
• Opt outs and refunds
• Review - Triennial Re-Enrolment
• Questions & feedback
Accountants' Division
4. 7 steps to Auto Enrolment
from The Pensions Regulator (TPR)
1 Know your staging date
2 Assess your workforce
3 Review your pension arrangements
Accountants' Division
Bureau / Accountants Shared Client’s
Responsible responsibility responsibility
5. Staging profile (volumes of employers)
Planning ahead is key.
Very large volumes staging
from January 2016
Q1 2015/16 peak
includes small and micro
employers
6. 7 steps to Auto Enrolment
from The Pensions Regulator (TPR)
1 Know your staging date
2 Assess your workforce
3 Review your pension arrangements
4 Communicate the changes to all your workers
5 Automatically enrol your ‘eligible jobholders’
6 Register with the Pensions Regulator and keep records
7 Contribute to your workers’ pensions
Accountants' Division
Bureau / Accountants Shared Client’s
Responsible responsibility responsibility
7. Point of Contact
It could be you!
Accountants' Division
Nominating a Point of Contact is a requirement on TPRs
website.
https://forms.thepensionsregulator.gov.uk/workplacepensionsreform/nominate.aspx
Not everyone realises you can nominate TWO contacts;
1) PRIMARY - Must be the Director / Company representative
2) SECONDARY - In order to ensure that you are in the best
place to support your clients it is possible (and advisable) that
the second person is whoever is doing the day-to-day
processing of Payroll / AE, i.e. YOU!
8. Who are my workers & what
will it cost?
Accountants' Division
9. • People could be subject to the automatic enrolment legislation
if they are:
full or part-time
permanent, temporary or casual workers
on ‘zero hours’ contracts
a contractor (even if considered self employed for tax purposes)
agency staff
staff seconded overseas, and/or
home workers.
Which workers may be affected?
10. Are they a personal services worker?
• The employer needs to judge whether or not an individual (who is not a
director) with a contract to perform work or services personally is 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. • The workforce should be placed into 3 categories to establish which duties you have towards
your workers:
1. Eligible jobholders
2. Non-eligible jobholders
3. Entitled workers
automatic enrolment
may ‘opt in’ to a qualifying pension
may join a pension
WKR/ER contrib.
WKR/ER contrib.
WKR contrib.
• The next criterion for assigning a category status to your workforce is based on their age and
qualifying earnings:
How to place your workers into the
relevant categories…
Accountants' Division
Over £10,000
Betw. £5,824 & £10,000
£5,824
12. Pay Reference Period Examples
Pay Reference Period 6th-5th (PRP)
Monthly pay £856 (Sally age 23)
6th
Pay-date
5th
25th
Pay Reference Period Mon - Sun
Weekly pay £113 (Paul age 24)
Mon
Pay-date
Sun
Fri
PRP
Lower level of
qualifying
earnings
Earnings trigger for
automatic enrolment
1 week £112.00 £192.00
1 month £486.00 £833.00
Sally: is an eligible jobholder and will be auto-enrolled
Paul: is a non-eligible jobholder who can opt in
Jack: is an entitled worker who can join a scheme
Monthly pay £480 (Jack age 21)
6th
Pay-date
5th
25th
Accountants' Division
13. Question : If someone is a personal services worker, but is
not on PAYE, how could an employer deal with
this?
Answer: It does not matter whether a person is paid
through PAYE or not
- If they are considered a worker they will need
to be assessed and automatically enrolled if
eligible.
- An employer could continue to pay them
directly, without deducting tax and national
insurance, but make a deduction for their
pension contributions as and when appropriate.
Questions and answers
14. • The minimum total contributions are being phased in over the next 5
years
• The minimum legal requirement rates by law are as follows:
How Much?
Contribute to your workers’ pensions
• The worker will receive tax relief on their contribution
• Employers should pay the contributions to the pension scheme by the
19th/22nd of the following month
Dates
Worker Contrib.
Difference *
Min. Employer
Contribution
Minimum Total
Contribution
From Staging date to
30th Sep 2017
1% 1% 2%
From 1st Oct 2017 3% 2% 5%
From 1st Oct 2018 5% 3% 8%
* If the employer contribution is sufficient to make up the minimum total contribution, then no worker contribution will be required.
Accountants' Division
15. Although MOST companies will use the table on the previous slide, there are alternative ways
of implementing AE as follows;
How Much?
Contribute to your workers’ pensions
Accountants' Division
Pensionable Pay
Worker Contrib.
Difference
Min. Employer
Contribution
Minimum Total
Contribution
Total Qualifying
Earnings
1%
3%
5%
1%
2%
3%
2%
5%
8%
Pensionable Pay at
least 85% of Total
1%
3%
5%
1%
2%
3%
2%
5%
8%
Basic Pay*
1%
3%
5%
2%
3%
4%
3%
6%
9%
* Calculation starts from £1 of earnings
16. Example
Calculations under AE
Monthly pay £1800 (Peter age 23)
PRP
Lower level of qualifying
earnings
Earnings trigger for
automatic enrolment
Upper level of
qualifying earnings
1 month £486.00 £833.00 £3,532.00
£1800 – 486 = £1,314 pensionable pay
Dates
Worker Contrib.
Difference
Min. Employer
Contribution
Minimum Total
Contribution
From 1st Oct 2018 5% 3% 8%
5% WKR £65.70 (Peter = £52.56 / Tax relief = £13.14)
3% ER £39.42
Total Contribution 8% £105.12
Accountants' Division
17. Example
Another example (capped)
Monthly pay £5000 (Julie age 43)
PRP
Lower level of qualifying
earnings
Earnings trigger for
automatic enrolment
Upper level of
qualifying earnings
1 month £486.00 £833.00 £3,532.00
£3532-£486 pensionable pay = £3,046
Dates
Worker Contrib.
Difference
Min. Employer
Contribution
Minimum Total
Contribution
From 1st Oct 2018 5% 3% 8%
5% WKR £152.30 (Julie = £121.84 / Tax relief = £30.46)
3% ER £ 91.38
Total Contribution 8% £243.68
Accountants' Division
18. • Workers get categorised based on Age / Qualifying Earnings &
whether they are a UK worker
• Qualifying Earnings are usually all Ni-able earnings, but there are
some exceptions
• Using the Qualifying Earnings model, pensions are calculated on
Qualifying Earnings between the Lower Threshold and the Upper
Threshold, not on all earnings
• It is a legal requirement to send the right letter to the right person
at the right time and the letters must match very specific
requirements
Key things to remember (2)
In brief…
Accountants' Division
20. • Not all existing pension schemes will be suitable for AE
• Anyone on an existing pension scheme can stay on that as long
as contributions at least meet minimum AE requirements
• Some companies may need / want more than one pension
scheme
• Usually you need to perform the initial assessment earlier than
expected (because 1st of the month is in the prior Tax Period)
Key things to remember (4)
In brief…
Accountants' Division
21. • Postponement is possible BUT it adds a level of complication and additional
administration. Employers MUST NOT use postponement because they are
not ready
• Any employee who has been postponed can ask for this to be reversed and the
EMPLOYEE’s Decision is final
• Postponements can be used;
At Staging
For new starters
Where an employee has had a ‘temporary’ Pay Spike
Where an employee turns 22 so becomes Auto-Enrolable
• Every time you postpone you MUST tell the worker this has been done (by
letter)
Key things to remember (5)
In brief…
Accountants' Division
22. Postponement
Example 1 – Pay Spikes
Assess
Auto-enrolment
Trigger £833
Postponement Postponement
Re-Assess
Erica – 30 years old – PRP from 6th to 5th of the next month
Accountants' Division
£850
£840
£830
£820
£810
£800
£790
£780
23. When to make the assessment
Tax Period
including
Staging
date
Worker’s
starting
date
22nd
birthday
16th
birthday
Opt-in or
joining
notice
Deferral
dates
PRP
Accountants' Division
24. • Anyone who is Auto Enrolled can chose to Opt Out
• If they Opt Out in the first month (after receiving notification they
have been enrolled) they can get a refund of any contributions
already made
• Non-Eligible Job Holders can choose to Opt In (and then the
employer needs to contribute also)
• Entitled Workers can choose to join a pension but the employer
doesn’t have to contribute
• Every 3 years anyone who has Opted Out more than 12 months
ago needs to be re-enrolled
Key things to remember (6)
In brief…
Accountants' Division
25. • As it stands at present, SINGLE directorships where there are no
other directors / workers do NOT need to do Automatic Enrolment
• It is advisable however to inform TPR that they will not be complying
• Multiple Directorships (even Husband/Wife teams) depends on what
CONTRACTS the directors hold. If they do not have any written
contracts AND there are no other workers they are also exempt.
• However, if there are any other workers, or is any of the ‘directors’
have a written contract (as an employee or worker would have) then
ALL in the business are to be included and assessed as any other
business.
Directors
Accountants' Division
27. It isn’t optional!
The Consequences
There are consequences if an employer fails to comply with their automatic
enrolment duties.
It is a criminal offence for an employer not to:
• set up in first place
• auto-enrol all Eligible workers
• re-enrol every 3 years!
It is also a criminal offence for an employer to:
• Force employees to opt out or to even suggest it would be viewed
positively
Accountants' Division
28. It isn’t optional!
The Consequences
Penalties
TPR can compel employers to comply with their auto-enrolment duties and The Regulator
can impose a penalties on employers who fail to comply.
Update Quarter 1 this year;
Stage 1 – Approx. 5000 compliance notices (warnings) were issued
Stage 2 - In the last first 9 months of this year 400 firms were hit with a
£400 fine
Stage 3 - In some cases, TPR can impose a daily penalty of between £50
and £10,000 depending on the number of employees affected. So far
they have issued 5 fines, which were at the level of £500 per day…
Accountants' Division