Question: The 1st June 2015 was described as ‘Test tranche for less than 30 members’ what does this mean?
Answer: “The Pensions Regulator (tPR) is running a test tranche of smaller employers from 1st June to see how they cope and look at any problems that may arise ready for the vast majority that start later this year. Businesses with fewer than 49 employees will now begin to be staged in between June 2015 and April 2017, instead of the previous timing (which would have started during 2014). These small employers will be split between those with 30 or more employees (who will be staged between August 2015 and October 2015) and those with fewer than 30 (who, apart from a test tranche in June 2015, will not be staged until January 2016). Even if a Company is not in the test tranche, they still need to plan and budget for how they will comply with their new duties. Employers that are part of a group should be aware, as the whole group will be staged in together, meaning they will be staged in early (at the same time as the largest PAYE group). Any seasonal businesses who are allocated a date during the peak of their activity can bring forward their staging date to avoid dealing with the additional administration and employee communications/queries at their busiest time of year.
Assessing the workforce: Not all employees are covered by the new duties and there are different requirements for different categories of employees, Companies should make sure they know which duties are owed to each category of workers. ‘Entitled workers’ will only be entitled to receive information and opt in (with employee contributions only). ‘Non-eligible jobholders’ will be entitled to opt in and get employer contributions. ‘Eligible jobholders’ must be automatically enrolled with employer contributions, and must be told they can opt in during any waiting period, and that they can opt out once they’ve been enrolled. Employees will be categorised as at the staging date but employers should do an initial assessment in advance to prepare – a basic workforce assessment using TPR’s interactive tool.
Plan communication: As mentioned above, entitled workers and non-eligible jobholders will be entitled to receive information about opting in and eligible jobholders must be told they can opt in during any waiting period, and that they can opt out once they’ve been enrolled. Employees may also need to be informed or consulted about changes to an existing scheme. Some employers may reduce costs by offering more than one scheme. However, care will be needed when communicating this to employees as this ‘two tier’ approach could be badly perceived – so communicating choice of scheme itself may need careful consideration and planning. Review business software and payroll system, as they’ll need to pay employer contributions, and deduct employee contributions and also refund contributions to employees who opt out. This needs to be included in budget forecasts.
Keep records of employees who opt out, and monitor the ages and/or earnings of jobholders to be aware of when they change their category and thus have different entitlements. As from ‘staging date’ provide information to employees, auto-enroll employees and providing information to each pension scheme about those being enrolled into that scheme. A Company therefore needs to have a procedure in place for auto-enrolling staff and dealing with opt-ins and opt-outs.
Employers are allowed to impose a waiting period of up to three months. This will be useful as it will remove the duty to enroll very short term employees, and will help reduce the administrative burden for employers with a high staff turnover. It will also enable employers to align enrolment periods with pay periods, so they don’t have to deal with partial contribution periods. Employees are then auto-enrolled at the end of any such waiting period, and they have about 4-6 weeks within which to opt out. If they do so within this time, they are treated as if they were never a member of the scheme. However, their contributions will likely have already been taken before such opt-out, and therefore refunds will become due and payroll will need to cope with this.
Registration with tPR: Employers must register online with the Pensions Regulator within four months of their staging date to confirm they have fulfilled their obligations, giving information about the pension scheme(s) they are using and how many people they have enrolled into it. Employers will be able to use agents for the registration process:- HR, Accountant or Financial Advisor.
Ongoing obligations: New employees, triennial re-enrolment and record keeping… Each new employee must either be auto-enrolled (or told they can opt in, if they are a non-eligible jobholder or entitled worker), and every three years employers must also re-enroll any staff who have opted out. There is a six month window for such re-enrolment.
Seasonal businesses that have peaks of activity should consider this when deciding on a re-enrolment date in order to avoid the burden of additional administration during busy periods.
Employers will be required to keep records in respect of those who opt out (records must be kept for at least six years). In addition, employers will also need to monitor employee ages (if under 22) and earnings, because these employees will need to be auto-enrolled and/or provided with relevant information when they turn 22 or if their earnings increase above the earnings thresholds.
Further information -The Pensions Regulator website has information for employers and advisers, including detailed guidance explaining the new auto-enrolment duties.
The pensions regulator has also launched some interactive tools for employers, which are designed to provide small businesses in particular with a simple and practical way to learn about the new duties, including how to: find out their staging date understand which staff need to be automatically enrolled into a pension scheme, understand how to automatically enroll staff, find out how much they will need to contribute for each eligible worker.
Some helpful links:-
http://www.thepensionsregulator.gov.uk/employers/the-essential-guide-to-automatic-enrolment.aspx
Reporting and regulator duties- http://www.thepensionsregulator.gov.uk/employers/reporting-and-regulatory-duties.aspx
Communicating with your team- http://www.thepensionsregulator.gov.uk/employers/communicating-with-your-scheme-members.aspx
Thank you for our guest BLOG for providing a very detailed and insightful answer to our question: James Tarry DipFA CeMAP, Financial Planner, Mob: 07713 266916
