3. Establish the “staging date”
PAYE size at 1 April 2012 Default staging date
120,000 or more 1 Oct 2012
10,000 to 19,999 1 Mar 2013
3,000 to 3,999 1 Jul 2013
250 - 349 1 Feb 2014
50 - 89 1 Jul 2014
<50 1 Mar 2014 – 1 Feb 2016
New employers 1 Mar 2016 – 1 Sep 2016
Employers may apply to bring forward their staging date. The
Pensions Regulator will write with 12 then 3 months notice
3
4. Qualifying Criteria
• Must allow employer to automatically enrol,
opt in and re-enrol a jobholder
• Must not require the jobholder to express a
choice or provide any information
• Must be a tax-registered occupational
or personal pension scheme
Some non-UK pension schemes can be
qualifying (separate criteria apply) but cannot
meet the automatic enrolment criteria
4
5. ELIGIBLE NON- NON- ENTITLED
JOBHOLDER ELIGIBLE ELIGIBLE WORKER
JOBHOLDER JOBHOLDER
Earnings Above £7,475 Above £5,035 Above £7,475 Below
(2011/12 (2006/7 terms) (2011/12 £5,035
terms) but below terms) (2006/7
£7,475 terms)
Age 22 to State 16 to 75 16 to 22 16 to 75
Pension Age
Eligible for Yes No No No
auto
enrolment?
Eligible for Yes Yes Yes No
company
contributions?
Can choose to Yes May opt in May opt in May join
opt out?
5
6. Minimum Requirements – DB schemes
OK if contracted-out of the
State Second Pension
OK if meeting the “test scheme standard”
− Broadly 1/120ths of qualifying earnings
from State Pension Age
• CARE schemes subject to additional
requirement for annual revaluation of benefits
All qualifying schemes must be UK tax-registered
occupational or personal pension schemes
6
7. Minimum Requirements – DC schemes
• Based on contribution rate
• % of qualifying earnings ie £5,035pa to £33,540pa
in 2006/7 terms - to be updated in Jan 2012
• Phasing in of minimum contributions
2% total contribution 5% total 8% total
2% 3%
1% employer contribution
employer employer
Staging period
October October October
2012 2016 2017
Not yet known how salary sacrifice be treated
8. DC schemes Certification alternative
• Flexibility where pensionable earnings not
based on qualifying earnings
• Proposed options recognise pay from the first £1 of earnings
• Three options: (1) base pay, (2) pensionable pay at least 85% of total
pay and (3) total pay
(1) 3% (1) 6% (1) 9%
Minimum total (2) 2% (2) 5% (2) 8%
contribution (3) 2% (3) 5% (3) 7%
Minimum employer (1) 2% (1) 3% (1) 4%
(2) 1% (2) 2% (2) 3%
contribution
(3) 1% (3) 2% (3) 3%
Staging period
October October October
2012 2016 2017
8
9. Minimum Requirements: Hybrid plans
• Neither DB nor DC but which
generally have elements of both
− e.g. cash balance, fixed benefit
• Depending on type, will need
to meet DB or DC requirements,
or a combination of both
• DWP to issue further details and guidance
9
10. National Employment Savings Trust
(NEST)
• Aimed at low earners and micro employers
• Trust-based multi-employer DC scheme
• NEST needed as DC pension providers
declined to offer existing products
to target group due to profitability
• Cap on contributions of £4,200 pa
(in 2011/12 terms)
• No transfers in or out normally allowed
• Will qualify for automatic enrolment
Perhaps use for entitled workers or specific
high turnover, low paid employee groups.
You can use more than one scheme.
10
11. NEST investments
• Intended default investment approach
begins with low risk: NEST feels that
target group may react badly to losses
… could restrict scope for long term growth
… and flies in the face of current convention!
NEST Approach
Traditional Approach
Risk
Long Term
Mid Term
Short Term
12. NEST – taking benefits
• The same as other UK registered schemes
• Benefits available from age 55
• Tax free lump sum = 25% fund value
• Trivial commutation allowed
• Retirement options and process?
High ambition for online administration and
“decumulation” without advice – at odds with the
circumstances of the target group?
13. When to automatically enrol
• The first date a worker meets the
criteria to be an eligible jobholder
• Employers can choose to postpone
automatic enrolment for up to 3
months
(must give information to the eligible
jobholder and he/she may opt in)
• Employers can postpone automatic
enrolment to a DB/hybrid scheme up
to October 2016 (conditions apply)
13
14. Opting out
• Ongoing membership of a pension plan not
compulsory
• Jobholders may choose to opt out
By giving an Opt-Out Notice within the opt-out period
… after having been enrolled into a pension scheme
… and having received the enrolment information
• Entitled workers have no opt-out rights
But do have a 30 day cancellation period
(personal pension schemes)
• It is not possible to opt out after the opt-out period
has ended but jobholders may cease active
membership
− Entitled workers may do this at any time
14
15. The opt-out period
Auto-enrolment
date
Earliest possible Earliest possible Latest possible
start date for date opt-out date opt-out
opt-out period period ends period ends
Latest possible
start date for
opt-out period
Window for possible opt-out period
Joining window
1 month 1 month
If opt-out period started early in joining window, may be
possible to reach end of opt-out period before contributions
passed to the pension scheme – may ease refund process
15
16. The opt-out notice and refunds
• The opt-out notice must normally be provided from
the pension scheme and NOT the employer
− due to concerns over employers pressurising opt outs
− exception – occupational scheme in-house administration
• The employer must check opt-out notice is valid and, if so:
− stop deducting contributions
− let the scheme know
− issue any refunds
• Time limits for contribution refunds
− Must not wait to get contributions back from the pension scheme
Occupational schemes normally allow refunds outside
the opt-out period on ceasing active membership within
two years - the Government plans to address this
16
17. Tax issues
• “Enhanced” and “Fixed Protection” from
the “Lifetime Allowance”
− Generally do not permit further benefit accrual
− Likely to be retained if an eligible jobholder is
automatically enrolled but subsequently opt outs
• Jobholders enrolled on a “salary sacrifice “
− Can the salary sacrifice
arrangement be cancelled?
17
18. Start preparing
• Establish the staging date and prepare a project plan
Step 1
• Assess the workforce to determine the likely Auto-
Step 2 Enrolment responsibilities and financial implications
• Assess which pension schemes are to be used and for
Step 3 whom. Review and make amendments where necessary.
• Review the internal procedures, including payroll, joining
Step 4 and opting out processes
• Prepare communications and documents
Step 5
Enquiries: email autoenrol@barnett-waddingham.co.uk
18
