Staging Dates

There is a lot of work to do before the staging date to ensure that the company is fully compliant with all the regulations and has the necessary systems in place to commence with auto enrolment.

Link to government imposed employer staging dates

Unfortunately, it’s doesn’t end there! The rules around contribution levels are different for companies certifying their existing money purchase pension schemes and the money purchase element of certain hybrid schemes. Details on these and the requirements for certifying and guidance on default fund options can be found on the Department of Work and Pensions links below. However, obtaining independent financial advice in this area is recommended.

“Qualifying earnings” is earnings between £5,824 and £42,385.

However, these minimum contribution levels will be phased in between October 2012 and October 2017.

QWPS

Credencis are able to provide a range of QWPS solutions, whether NEST, a bespoke money purchase scheme or utilising an existing in house scheme (subject to meeting the requirements under the law).

Go to the NEST website

Guidance for offering a default option for defined contribution automatic enrolment pension schemes:

Guidance on automatic enrolment pension schemes

Guidance on certifying money purchase pension schemes and the money purchase element of certain hybrid pension schemes:

Money Purchase Scheme Guidance

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Employer’s Duties

An employer is defined as anyone who has a contract with a ‘worker’. The employer has certain duties and safeguards they must adhere to in relation to enrolling the worker into a pension scheme.

As a minimum, an employer with 1 or more worker(s) will need to register with The Pensions Regulator. It is essential that employers understand the different categories of workers and the duties they will have in respect of each category – “eligible jobholders”, “non-eligible jobholders” and “entitled workers”.

Employees

It is worthwhile reading the information on the rest of this website to have an understanding about what is expected from an employer and what auto enrolment means.

Each company will have been allocated a staging date, a date whereby they must start enrolling eligible workers into their company pension and make contributions.

The employer has several duties, one of which will be to provide each worker with an enrolment pack which will detail the information about the pension scheme and the employee’s rights.

An employee’s rights will be dependent on what category of worker you are.

You will be aged between 18 and state retirement age and have qualifying earnings payable by the employer (in the relevant pay reference period) that are above the earnings trigger for automatic enrolment (currently £10,000).

Contributions into the pension will have to be made by the employer (see below) and any shortfall will have to be made by you, the employee. So for example, if the minimum overall contribution is 8% of qualifying earnings (explained later) and your employer pays the required minimum of 3% then you, the employee must pay 5%, less tax relief.

As an eligible worker you will have the right to opt out of the pension scheme, but you will be automatically enrolled back in again after a period of 3 years from your original enrolment date. Any contributions made, could be repaid subject to opting out within the op-out window.

A non-eligible worker will be aged at least 18 and under 75 and have qualifying earnings payable by the employer (in the relevant pay reference period) that are above the lower earnings level for qualifying earnings (currently £6,032) but below the earnings trigger for automatic enrolment (currently £10,000)

Aged at least 16 and under 22 or between state pension age and under 75 and have qualifying earnings payable by the employer (in the relevant pay reference period) that are above the earnings trigger for automatic enrolment (currently £10,000).

As a non-eligible worker, you will not be automatically enrolled into the pension scheme, however you have the option to join and if you do, your employer must also contribute the minimum level.

An Entitled worker is ‘entitled’ to join a pension scheme however the employer does not have to make any contribution. These are workers who are aged at least 16 and under 75 and have qualifying earnings payable by the employer (in the relevant pay reference period) that are below the lower earnings level for qualifying earnings currently (£5,824).

Qualifying earnings are earnings paid for by your employer in the relevant pay period (likely to be the tax year) that are between £5,824 and £42,385. The contributions that are payable from the employer and employee into the pension are a percentage of this band of earnings. (Levels are subject to change).

From October 2016 this increases to an overall minimum of 5% with at least 2% from the employer and then from October 2017 onwards, 8% minimum with at least 3% from the employer.

The pension scheme that an employer must provide for its members must meet specific criteria. The government default scheme is called NEST, the National Employment Savings Trust. There is a link on our website for this. Whilst many employers may opt for this scheme, there will be others who either utilize their existing company pension scheme or look to set up a new one.

Rather than list and detail all the options that could be available, we would strongly recommend that each individual employee understands their employers scheme and the options available for investment.

An employer must ensure that the pension scheme has a suitable default fund for its employees, especially those who will be automatically enrolled into it without the benefit of choosing fund options prior to enrollment.

An employer must not give any advice to its employees on whether to join the pension or not. An eligible worker will be automatically enrolled, but can opt out but this must not be influenced by the employer, nor must the employer offer any advice to the employee.

Should the employee require advice, they must either seek guidance from The Pension Regulator or obtain advice from an Independent Financial Adviser.

Auto Enrolment Software

Presently there is jargon free software available that takes care of all your auto enrolment needs, both in terms of the regulatory requirements and the practical day to day duties.

With the Pensions Act 2008 and the duties associated with auto enrolment, there are many key requirements that will need implementation, monitoring and rigorous reporting back to the Pension Regulator. Keeping a solid audit trail and maintaining records for six years is essential. Knowing which employees are affected, which have opted out and ensuring they will be auto enrolled every three years, managing the pension contributions and liaising with payroll and HR will be key.

Our software will take care of all the employer duties to make sure you’re fully compliant with all the new requirements at a minimal cost compared to setting up new in house departments and employing staff to manage the process.

When we talk to companies the question we are most often asked is “why do I need to do anything now when my staging date is not imminent?” The 43 Staging Dates allocated to UK firms range from October 2012 to September 2016, with the larger firms going first and the smaller last. With over 600,000 firms reaching their Staging Dates in the 2015 the obvious advantages of jumping what is potentially a queue of a million other employers is compelling to many of the firms we are speaking to each week.

Acting earlier than they need to will guarantee our method of providing full compliance whereas waiting until the queue forms may not. Acting early also adds many other benefits, including the opportunity to introduce valuable flexible employee benefits through our software. Additionally you can introduce the costs of the reforms themselves over a period of a few years while potentially mitigating those costs by utilising the powerful salary exchange processes that are built into the auto enrolment software.

At Credencis, we have a comprehensive suite of options to suit all businesses, whatever your needs.

Auto Enrolment

Requirements of new pension regulations pertaining to auto enrolment

From 2012 these changes have affected every employer in the UK and offers solutions on how to prepare, implement and manage employer duties associated with the new law.

Following October 2012, all eligible workers will be automatically enrolled into a Qualifying Workplace Pension Scheme with compulsory contributions from the employer.

The new laws are part of the Pensions Act 2008, an initiative that was introduced by the Labour Government, and continued by the Coalition Government.

Auto Enrolment will have an impact on any business that employs staff, whether it’s just 1 person or 1000. The employer duties associated with the new law are both complex and potentially time consuming and costly.

Early preparation is essential to ensure the changes required to systems, processes and communication materials are identified and all parties, including HR and payroll, fully understand the complex requirements.

Auto Enrolment Facts

For many years the Government has looked at ways to encourage the UK workforce to save for their retirement. There have been several changes to pension legislation but none as big as the Pension Act 2008 and the Pension Reforms that will affect every employer in the UK – Pension Adviser Nottingham, Credencis

Death Benefits of Annuities

Annuities have a new tax treatment on death:

If death occurs before age 75, any beneficiary can receive income payments tax free.

If death occurs after age 75, any beneficiary can receive income payments at their marginal rate of tax.

If Annuity Protection Death Benefit is triggered:-

If death occurs before age 75, any beneficiary can receive the lump sum payment tax free.

If death occurs after age 75, the lump sum paid out would incur a 45% tax charge for the current tax year 2015/16. From 2016/17 the lump sum is paid out at the beneficiaries highest marginal rate.

Advantages and Disadvantages of Annuities