00:00:24:26 Glenn Emma, can you give us a brief background into, into auto enrolment?

Transcription

1 Time-codes Pensions 00:00:04:08 Interviewer Hello my name s Glenn Collins and I m ACCA UK s Head of Technical Advisory. Today s vodcast we re going to consider work place pension reforms. It s part of a series of vodcasts, where we look at the key issues that are affecting businesses. Today I m with Emma Peria, from the pensions regulator. Hello Emma, and welcome 00:00:23:00 Emma Thank you for inviting me today. 00:00:24:26 Glenn Emma, can you give us a brief background into, into auto enrolment? 00:00:29:03 Emma We re living longer and healthier lives, which is good, but not enough of us are saving for our retirement. By 2050 it is predicted there will be only two people of working age for every pensioner. At the moment there is approximately four. So we need to do something, people need to take responsibility for their retirement savings, to make sure that they have the 00:00:48:22 standard that they re looking for. So automatic enrolment is part of a package of work place reforms and over the coming years employers will be required to enrol employees in a pension scheme automatically. That is from whether they have one employee upwards. So what we re talking about is possibly between five and eight million people saving more, or indeed saving for the 00:01:14:15 first time for their retirement. And that will be with the support of probably over 1.3 million employers. 00:01:22:06 Glenn So are employers just required to enrol employees within the government nesting? 00:01:28:02 Emma

2 No, Nest is just one of many pension providers that employees can use to fulfil their duties. What we need to make clear is that Nest is not synonymous with automatic enrolments. And that employers need to consider carefully what pension scheme they use, for their workforce. Obviously their decisions that they make will affect the long term future of their workforce. 00:01:48:16 Glenn So, what are the time frames for, for auto enrolment? 00:01:51:10 Emma Auto enrolment is happening, and it commences from October 2012, when the largest employers are subject to their duties. All employers who have over 250 employees, their staging dates have been set and will fall before March They can go onto our website and find out exactly when their staging date is. In November 2011 the government decided to consider 00:02:16:09 employers with under 249 employees, but they may need more time to prepare for automatic enrolment. And their staging dates will fall between April 2014 and April The exact details of these dates will be available later in the year and again, I would direct people to our website, for confirmation of their staging dates. However, employers have the opportunity 00:02:41:20 should they wish, because it might fall in with their, their financial year, to bring forward their staging date, which they can do, they just need to let us know as the regulator, about a month beforehand. 00:02:52:30 Glenn What is it that employers actually have to do? 00:02:55:13 Emma The employer duties require the employer to enrol all their eligible workers into a pension scheme that meets the criteria as laid out by the department working pensions. They obviously need to then contribute to that individual s pensions, maintain the records so that the individual can access their

3 retirement savings when appropriate. And also communicate to all their 00:03:18:20 employees about automatic enrolment, and how that might affect them. There are two activities that employers must not participate in. Firstly, they must not encourage or incentivise employees to opt out of the scheme, nor must they discriminate against potential employees who wish to take part in a pension scheme. 00:03:36:03 Glenn That auto enrolment is clearly something that employers um, need to know about and need to know about now. How should accountants get involved in this, this process? 00:03:44:25 Emma I know it may not seem immediately obvious about how accountants can get involved, but obviously pensions for some employers is particularly smaller employers, is quite a big deal for them and a new area for them. And in some research that we actually conducted at the end of 2011, 65% of those employers we spoke to said they would actually turn to an advisor for some 00:04:07:16 support and information. And of that 65% of people, half of them actually identified as accountants as those they would seek advice from. 00:04:17:10 Glenn What role do you think accountants should actually play in that process? 00:04:22:03 Emma We feel that accountants could support employers by thinking through their payroll processes that they have in place. Perhaps about the cost associated with complying with automatic enrolment. And looking at general processes, such as registration, opt-ins, opt-outs, refunds, etc. 00:04:40:06 Glenn So there s clearly an awful lot going on in this particular area. Will you be offering any, any support or any, any help or assistance through to

4 accountants? 00:04:48:29 Emma Absolutely, and we are actually produced a check list, which is available on our website, which details what we re expecting employers to do and perhaps how accountants can help. And it looks at areas such as whether their existing scheme qualifies, whether, which employees they would actually need to enrol, in automatic enrolment, and how they may register with the 00:05:10:20 pensions regulator. 00:05:12:13 Glenn And, how do employers go and identify that the staff member, the person it actually needs to be, be enrolled? 00:05:21:02 Emma This is a very important and sort of fundamental task in the preparation for automatic enrolment. And there are three categories of workers. There is your eligible job holder, who automatically is enrolled into a pension scheme, your non-eligible job holder and also your entitled worker. And it is important that employers understand which category each of their employees um, 00:05:45:30 fit within, because they need to communicate to them and let them know what their entitlements are, under automatic enrolment. And also those that are advising those employees also need to be aware of that. And we feel accountants could really support employers in this because of their access to the payroll data. The three categories of worker are, and I m just going to 00:06:06:28 refer to my notes, just to make sure I get it absolutely right, is the eligible job holder is aged between 22 and state pension age and earns over These employees need to be automatically enrolled and the employer needs to contribute towards that. The second group, non-eligible job holders are those who earn between 5564 and 8105, or those who earn more but are 00:06:36:06 under 22 or between state age and :06:40:26 Glenn

5 I mean this is clearly a very complex area. I know it terms of tax status this is also very very difficult and very difficult to, to understand. I mean we have we have a particular concerns about, just because of a tax status, um, a person being an employee or not an employee, that actually doesn t follow through within the, the pensions regulation, so really everyone needs 00:07:07:03 to look quite closely at these areas. You also mentioned checking the schemes and checking that schemes are viable, is important. Can you tell us a bit more about, about that? 00:07:18:20 Emma Absolutely. As you can imagine, for some employers, you know, who, this is a new world, the new world of pensions, that they ll find it quite difficult and they may turn for advice. And what we need to be sure of, there s sort of categories of employers, those that have an existing pension scheme and those that may be looking to set up a new scheme for automatic enrolment. 00:07:38:08 And where we see that employers might come and speak to accountants in terms of their existing pension scheme would be to understand whether it meets the criteria of a qualifying scheme as laid out by the department of work and pensions. Or, seek advice about how, what changes may be needed to that scheme to make it um, applicable. So whether that be, the 00:07:59:08 contribution levels or barriers to entry. There may be less of a role to play for accountants if they re setting up a new scheme, however, they may still be able to give advice about those qualifications, those criteria that they need to reach. We do anticipate that most employers will probably use a defined contribution, i.e, a money purchased um, scheme to fulfil their, their 00:08:22:09 requirements, their duties. So we are working very closely with industry at the moment to make sure that the products that become available are of, um, meet the criteria. So, there are a number of principals that we re um, developing, and they cover areas such as making sure that the scheme is durable. These schemes are going to be around for 20, 30, 40 plus years so 00:08:45:21 they ve got to stand the test of time. Make sure they have the governance frameworks in place and make sure that they monitor those on a regular basis. Make sure that the people that are running the scheme understand

6 their duties and their responsibilities and have the knowledge and experience to do it properly. Another principal is around record keeping and 00:09:03:17 administrating, administration, making sure that those processes are robust. And finally, um, employee communications, making sure that, you re thinking about the employee and, so that they can understand and make informed choices about their retirement savings. 00:09:18:20 Glenn Who s going to be responsible for registration? 00:09:23:02 Emma It is employers legal duty to register with the pensions regulator to confirm that they ve complied with their duties. However, they may wish to use an agent to fulfil that on their behalf, perhaps somebody they normally work with who does their tax and national insurance contributions with HMRC, such as an accountant. And that may be a service that accountants choose or not 00:09:44:13 to, to offer. There are 3 pieces of information that an employer will need in order to register. That being the employer details, the details of the pension scheme and the membership scheme details as well. 00:09:57:24 Glenn Presumably that s not the end of a particular process? 00:10:01:13 Emma And you re absolutely right. Registration is not the end, there is an ongoing commitment by the employer to keep, obviously, contributing to the individuals pensions but also record keeping, make sure that that is kept up to date. Because that s going to be important for people accessing the information about their, their own scheme. 00:10:19:17 Glenn There s going to be an awful lot of people registering, 1.3 million, how will you look after that, how will you make sure that, that people have registered?

7 00:10:29:07 Emma We will use the data that we receive from HMRC, which allows us on a month by month basis to see which employers should have registered with that, with us, and then we can review that against our own records, and identify anybody who hasn t complied. And that s going to be the basic, the foundation of our monitoring process. However, I would like to say that if 00:10:49:23 we find out that people haven t registered with us but they are compliant we won t be taking any further action. 00:10:56:09 Glenn So what other ways will you have of identifying breaches? 00:10:59:14 Emma We have other opportunities that we can to identify breaches, but one is our whistle blowing facility. And this will allow people to actually contact the regulator, whether that be an individual employee, a representative of the employer or a scheme representative, to let us know whether there s any issues, whether there s been any um, prohibited activities, such as 00:11:20:00 incentives or whether employers haven t been making their contributions. 00:11:24:20 Glenn So one of the key things employers will want to know, what will you do if they won t comply, err, will there be penalties? 00:11:32:29 Emma Where we see non-compliance we will obviously review on a case by case basis, and where we feel it is proportionate and appropriate we will intervene. We are writing to all employers, twelve months and three months before their staging date. And if employers have still not complied by their staging date we will issue them with a compliance notice. In this notice we give them a 00:11:54:06 period of time in which to become compliant. They have the opportunity to contact us and we can offer whatever advice and support we can to help them

8 towards compliance. Obviously if they continue to be non compliant then we have actually other powers that we can use, including financial penalties. 00:12:13:15 Glenn Ok, so, don t ignore the letters when you see them and make sure you actually err, comply by and register by the appropriate date. 00:12:21:07 Emma Absolutely and what we say is, do get in touch with us at any time if you re struggling or having any difficulties. The sooner you get in touch with us the sooner we can actually offer support. 00:12:31:20 Glenn So where can you find out more support. You ve mentioned phoning you and contacting you, is there other support that s available? 00:12:37:10 Emma We have a lot of information available on our website, such as detailed guides, talking about automatic, automatic enrolment and the reforms, and that s probably relevant for somebody who s got a bit of pensions knowledge. We also have interactive tours, which are available more for those who that no knowledge of pensions or those advisers that are working 00:12:56:16 with advisers that are working with employers with limited knowledge about pensions. And also we have check lists, and we also have the eight tasks that we ve specifically developed for accountants, and that s all available on our, our website. And we regularly publish news about new products and services that we have through our news by service, which people can 00:13:14:15 register for on our website. And they can register either to receive all the information from the regulator or just information in relevance to work place pension reforms. And I understand that you yourselves have got a lot of information about the reforms on your website. 00:13:29:28 Glenn

9 Yes we do, we ve got a lot of information there which is available to our members. 00:13:34:21 CUT