NSL Auto-Enrolment Frequently Asked Questions

Transcription

1 NSL Auto-Enrolment Frequently Asked Questions About Auto-Enrolment This document contains a number of Questions and Answers relating to auto-enrolment, and how this might affect you. 1. When will I be enrolled? The implementation date (known as the staging date) for NSL was 1 July 2013 and NSL used the flexibility permitted under the law to defer this date until 1 October All colleagues were assessed against the auto-enrolment eligibility criteria on 1 October 2013 and if they met them were automatically enrolled into the NSL Pension Trust with effect from this date. All new joiners after 1 August 2013 will be advised separately of their assessment and enrolment date. 2. What are the auto-enrolment eligibility criteria? Under auto-enrolment legislation, NSL have a legal requirement to automatically enrol employees who are: Not already contributing to an NSL sponsored pension plan i.e. o LGPS o NHS Pension Scheme o Prudential Platinum o NSL Pension Trust Working in the UK Aged 22 to State Pension Age Have qualifying earnings over 9,440 per annum (in 2013/14 terms). More information on what qualifying earnings are can be found under question Which arrangement will I be enrolled into? The scheme that will be used for auto enrolment purposes will be the NSL Pension Trust. More information on the NSL Pension Trust can be found from question 18. If you are currently not a member of any of the NSL pension schemes listed under question 2, but believe you have a right to join one of them, you should contact the Pensions and Payroll Team in Westgate House so the matter can be looked into. 4. How will I know whether I have been enrolled? - You will receive a letter from the Trust Administrators confirming when you have been enrolled. 5. What if I don t meet the eligibility conditions on the auto-enrolment date? If you don t meet the eligibility conditions on the auto-enrolment date you will not be automatically enrolled into the NSL Pension Trust but we will still write to you with your options. You can still join the NSL Pension Trust if you want to, and your letter will explain how to do so. You will continue to be assessed against the eligibility conditions every month, and if you become eligible you will be automatically enrolled we will write to you to tell you if this happens, with further information about your pension plan membership and options available to you.

2 6. Do I have to stay in the NSL Pension Trust if I m auto-enrolled? No, you can leave the NSL Pension Trust by opting out if you want to. If you do so within one month of being advised of your enrolment, you will receive a refund of your contributions and will be treated as never having joined. Details of how to opt out will be provided to you when you are enrolled. You will be able to opt out via a secure web site or via a paper form. If your opt-out is processed before a certain date in the month, then it may be possible to avoid deducting any contributions from your pay. You will be advised of the cut off dates in your enrolment letter. If you opt out of the plan more than one month after your effective auto-enrolment date, you will be treated as a normal leaver from the Trust. In this instance, you would receive details from the Trust Administrators regarding your options. If you do decide to opt out, your circumstances will be re-assessed against the eligibility criteria on the three year anniversary of NSL s auto-enrolment date which will be 1 st July 2016, and if you still meet the eligibility conditions you will be re-enrolled. We will write to you to tell you if this happens. 7. I don t want to join the NSL Pension Trust can I tell you before I m enrolled? Under the legislation you can not opt out of the new plan until after you have been enrolled, so you will need to wait until this happens in order to do so. 8. What if I opt out, and change my mind at a later date? Can I rejoin the NSL Pension Trust? If you meet the eligibility conditions and are automatically enrolled, you may rejoin once at any time after opting out. 9. What is the impact if I am in another pension plan sponsored by NSL? If you are already a member, you will not be affected by auto-enrolment and will continue to build up benefits as before. You will receive a letter confirming this. 10. Have the ECCs been involved in the auto enrolment plans? We ve shared the need to change with the ECCs and some of the considerations required throughout the design phase. We ve also been working with the ECCs on the communications for auto enrolment and sharing the plans as they develop. There are certain legal notices that have to be sent as part of the legislation, so we ve also shared those at the ECC sessions. All the ECC presentations can be found on the Hub or via your Line Manager. 11. I am already drawing a pension but I still work for NSL. Will this affect me? If you are drawing a pension but are not a contributing member of any NSL pension arrangement then your circumstances will be assessed against the eligibility conditions as at your auto enrolment date. If you meet these conditions you will be automatically enrolled into the NSL Pension Trust. Please note that one of the eligibility criteria is age related, so if you are over State Pension Age you will not be affected. We ll write to you to let you know if you are enrolled, and how this affects you. 12. What if I am on long term absence when the changes happen?

3 Under the auto-enrolment legislation there is a legal requirement to enrol all employees who meet the eligibility conditions and are not contributing to a Company pension arrangement. This means that if you are on maternity, paternity, adoption, long term sick leave or any other form of absence, then you will be included in the assessment on your auto enrolment date, and on an ongoing basis if you do not meet the eligibility conditions at this date. 13. If I meet the auto enrolment criteria, what are the contributions to the NSL Pension Trust? If you meet the criteria, both you and NSL will contribute 1% of qualifying earnings each month to the NSL Pension Trust. Qualifying earnings are most elements of your take home pay between two thresholds which are set by the Government each year. For the tax year 2013/14, these thresholds are 5,668-41,450. Contributions will also be increased in October 2017 and then again in October When? Your contribution NSL contribution What pay is used to calculate your contributions? October 2013 September 2017 October 2017 September % 1% Qualifying earnings which are: 3% 2% October 2018 onwards 5% 3% Most elements of your take home pay between 5,668-41,450 (for the 2013/2014 tax year). These are likely to change each year 14. What elements of pay are included in qualifying earnings? The majority of pay elements listed on your payslip will be included. This includes: Basic pay Bonus Overtime Holiday pay Shift allowances Some other specific allowances There are some items excluded from the definition of qualifying earnings including: Allowances connected with travel e.g. car, travel, relocation, moped allowances Cleaning / de-icing allowances Redundancy payments Qualifying earnings will be used to assess your earnings and to determine the contributions that will be paid into the NSL Pension Trust each month. If your earnings vary from month to month then your contributions will also vary. Example Someone with take home pay of 17,000 a year (made up of wages, overtime and shift payments), would have a qualifying earnings amount of 11,332 ( 17,000 minus 5,668). The individual and NSL would each contribute 113 per year (or 1%), to the pension plan.

4 15. What if I am enrolled and then my earnings reduce in the following months? If you meet the criteria on your assessment date, then you will be enrolled in the NSL Pension Trust. If your earnings are reduced in later months you will remain a member of the NSL Pension trust and your contributions will be based on the qualifying earnings between 473 and 3454 each month(for the 2013/14 tax year). 16. Can I pay more than the minimum level of contributions? Employees are free to pay any level of additional contributions that they may wish to, provided that the annual amount contributed (from both employee and employer) does not exceed 50,000 per year (this is the figure for the 2013/14 tax year). If you decide to pay more than the minimum, the NSL contribution will not change and will remain at the level set out in the table in question 14. Details of how you can pay more will be provided when you join the NSL Pension Trust. One of the features of My Account is the pension calculator which lets you see how much retirement pension you may receive by topping up your contribution. 17. How will this affect my take home pay? - At the June 2013 ECCs we showed how auto enrolment would affect take home pay and how your payslip layout will change. A copy of this slide is shown overleaf.

5 Example Payslip - Comparison Pre Auto enrolment Earnings Amount Deductions Amount Wages Tax code (944L) Overtime 1_ NI (Category A) Total Earnings Total Deductions Employer s Contributions NI Category A Amount Paid Income tax deduction NI deduction Employers NI deduction This is your take home pay Post Auto enrolment Earnings Amount Deductions Amount Wages Tax code (944L) Overtime 1_ NI (Category A) NSL Pension Trust EE 9.42 Income tax deduction after joining pension. You get tax relief on your pension contributions, so you pay less tax 1% of qualifying earnings (i.e. above 473) less 473 = x 1% = 9.42 Total Earnings Total Deductions Employer s Contributions NI Category A 9.42 NSL Pension Trust ER Amount Paid /07/ NSL matches your pension contribution of 1% Your take home pay is 7.54 lower but: -You have contributed 9.42 to your pension AND - NSL matches this so is paid to the pension scheme

6 The NSL Pension Trust 18. What is the NSL Pension Trust? The NSL Pension Trust is a part of the National Pension Trust which is a Master Trust. This is a pension scheme trust, which is being used by many different employers. 19. Who runs the NSL Pension Trust? The NSL Pension Trust is governed by an independent Professional Trustee, Bridge Trustees Limited who is responsible for the day to day running of the Trust, including making sure that the right contributions are paid on your behalf and the ongoing stewardship for money invested in the NSL Pension Trust. 20. How does the NSL Pension Trust work? The NSL Pension Trust is a defined contribution pension scheme. This means contributions are paid to a Personal Account set up for you, each month. You Personal Account is made up of contributions to the Trust (both by you and NSL), plus or minus any returns on the investments you have chosen. When you come to retire you use this amount to purchase an annuity which is an annual retirement income. The NSL Pension Trust provides support to help you plan your retirement more effectively for your future by helping you understand: how much income you will require in the future; how much you will need to save each month to achieve this target; how to invest your retirement savings; how to select the right form of retirement savings, and most competitive terms available, for you personally. When you join the NSL Pension Trust you will be sent a Trust Booklet and an Investment Booklet to help you understand how the scheme works and the investment options available. If you are not comfortable in making an investment decision, the Trustee also provides a default option which is the Balanced Lifestyle strategy. More on this can be found under section What investment options are available? The NSL Pension Trust supports members in making their investment decisions in a number of ways: Governance the independent Professional Trustee pro-actively monitors the allocation of assets and the investment manager performance, amending them where appropriate. The Trustee is not restricted to the range of investments/fund managers it can offer to members. Support a range of communications and interactive tools available to provide you with a clearer view of: What kind of investor you are; and What kind of investment strategy could help you reach your retirement aims You would then need to decide whether to invest your future contributions in: The Balanced Growth Fund (which is the default investment option); or

7 One of the other Lifestyle Strategies (Cautious, Adventurous or Global Equity); or One or more of the 16 Self-Select investment options. Flexibility You may change investments or your Target Retirement Age (which in turn may adjust your investment allocation) at any time, free of charge. When you join the Trust you will receive an Investment Choices booklet which sets out all your options. 22. What is a Lifestyle Strategy? This is an investment strategy which tries to manage some of the risks for you. It s aim is to try to make sure you are invested in the right type of fund at the right time. Lifestyle Strategies automatically adjust your asset allocation (both existing and future contributions) over the period leading up to your Target Retirement Date to help protect your cash lump sum and the value of the annuity that your Personal Account could purchase when you retire. They can be useful if you wish to make a limited choice about the type of investment strategy you would like for your Personal Account but are not comfortable in managing your own asset allocation e.g. mix of equities, gilts, bonds, cash etc throughout your membership. The Trust currently offers four Lifestyle Strategies to recognise differing attitudes to risk. 23. What other support will I receive from the Trust? Once you have joined the NSL Pension Trust, the Trustee will write to you with a Trust Booklet, a summary of the NSL Pension Trust benefits and Investment Guide. You will also receive details of the NSL Pension Trust website which contains news, investment updates, fund fact sheets, member guides and copies of the Trust booklets. You will also be given access to My Account. This is your secure on-line interactive pension planning system which provides daily updates of your fund values as well as range of interactive features which help you understand what level of income you will need in retirement to pay for necessities such as housing and bills and other luxuries such as holidays. This then helps to establish what level of contributions are needed to help fund that retirement income. 24. What are the charges? The NSL Pension Trust will have an annual management charge (amc) of 0.59%, which would be deducted from your Personal Account each year to cover administration, Pension Regulator levy and Trustee charges. Further charges will be deducted depending upon the investment that you select. For example, passive funds (such as the UK Equity or Global Equity) and the cash fund have an additional charge of 0.11%, which would mean a total annual charge of 0.70%. The default investment option, the Balanced Lifestyle Strategy has an amc of 0.25%. 25. Can I transfer other pension benefits into the NSL Pension Trust? Combining all of your pension benefits into the NSL Pension Trust may be of benefit to you. By transferring, you may be able to save money by paying one set of lower fees. Plus you will also be able to use the valuable investment and retirement planning tools to help you manage all of your pension benefits. You can opt to transfer your existing benefits at any time. A Transfer In form will be made available to you once you join the Trust.

8 Of course, you can decide to leave your benefits in previous schemes. If you do, you would receive any investment growth applicable and it will be available for the purchase of benefits when you retire. There are no charges associated with transferring your benefits to the NSL Pension Trust. If you need advice on whether this suits your own financial position you should speak with an Independent Financial Adviser. If you do wish to obtain independent financial advice you can obtain details of three independent advisors in your area by logging onto and inputting your postcode or by calling Please note: the helpdesk can only provide information to you about the proposed changes and it is not regulated to provide financial advice. 26. How do I claim the tax relief on my pension contributions? Contributions to registered pension schemes attract tax relief (subject to certain annual limits). A key advantage of joining the NSL Pension Trust is that contributions would be deducted from your earnings before they are assessed for tax. This means that your contributions would attract full tax relief at source at your marginal tax rate.

9 Explaining Pension Terms Alternative Assets These are assets classes which are generally regarding as alternatives to mainstream assets such as equities and bonds. They include asset classes such as commodities, hedge funds, private equity. Annuity An annuity is an annual income, which is paid to you for life. It is usually paid by an insurance company, and is bought with the value of your Personal Account when you retire. You can buy different types of annuity depending on your personal circumstances. You may wish to leave a pension for your spouse or partner when you die, or you may have a medical condition which entitles you to a higher annuity. It is important that you investigate the different annuity options available when you retire, to get the best possible income from your Personal Account. Asset Allocation The proportion of your Personal Account invested equities, property, alternative assets, bonds, gilts and cash. Auto-enrolment Auto-enrolment is a Government initiative, which introduces a legal requirement for Employers to automatically enrol certain workers into a pension arrangement, and make a minimum level of contributions. This includes current employees who are not actively contributing to a Company pension arrangement or arrangement in which the Company participates, and new employees to the Company. NSL will need to meet the legal requirements during the course of this year. Bonds A bond is a type of loan made to a Company, known as a corporate bond. When you buy a corporate bond you are basically lending your money to a company. There is an agreed date (maturity date) by which the company must repay the loan at its face value, plus a pre-determined rate of interest. Capital gains or losses are made when bonds are traded on any day before the maturity date. They are sometimes viewed as a little less secure than gilts because there is more potential for a company to default on its payment, but they are usually expected to offer higher returns than gilts. Contribution The Contribution is the money paid by you and by NSL into your Pension Account. This is invested in funds chosen by you, from range of Investment Funds offered by the Trustee. Equities These represent an ownership position in a company. They are also called stocks or shares.

10 Gilts These are loans made to the UK Government. When you buy gilts you are lending money to the Government. For fixed interest gilts, the Government will pay a fixed rate of interest until maturity and then repay the face value at maturity. For index linked gilts, the principle is the same but the interest and maturity payments are increased by inflation. Capital gains or losses are made when gilts are traded on any given day prior to the agreed maturity date of the gilts. Investment Funds The money you contribute to your Personal Account is invested in funds managed by investment managers, to increase its value over the course of your membership. You might invest this in stocks and shares (known as equities), gilts, corporate bonds or even just in cash. There are a range of different funds available under the NSL Pension Trust for you to choose from. The value of these funds can go up and down, and the risk and rate of this happening is different for each fund. Some are more risky but can achieve a higher value, and some are more steady. The funds you choose will depend on your own personal circumstances and attitude to risk. Information on the fund available will be provided as part of the joining information sent to you when you are enrolled in the NSL Pension Trust. The Trustee has also set a default option (the Balanced Growth Fund) which is a Lifestyle Strategy. This option can be used if you do not feel comfortable in deciding where your contributions should be invested or fail or make any active decisions about your investment choices. Lifestyle Strategy This is an investment strategy which tries to manage some of the risks for you. Its aim is to try to make sure that you are invested in the right type of fund at the right time. They automatically adjust your asset allocation (both existing investments and new contributions) over the period leading up to your target retirement date to help protect your cash lump sum and the value of the annuity that your Personal Account could purchase on retirement. Pension A pension is an annual income which is paid to you for life, when you retire. With a Defined Contribution scheme (which the NSL Pension Trust Fund is) bought from an insurance company as an Annuity. See Annuity for further information. Personal Account Your Personal Account is the money saved by you during your NSL Pension Trust membership. It is made up of your contributions and the contributions made by the Company, plus or minus any returns on the investments you have chosen. Property Investment is generally in commercial property such as retail parks, shops, offices and industrial units spread around the UK. There will be little, if any, exposure to residential property.

11 Trustee The Trustee is responsible for managing the NSL Pension Trust, and making sure that benefits are paid in line with the Rules. It meets on a regular basis to review plan activity, and is supported by specialist advisors on investments, administration and legal matters.