AUTO ENROLMENT: STEP BY STEP PLANNING AHEAD. With auto enrolment underway, employers must now automatically enrol eligible employees into a qualifying pension scheme. We want to support you through this huge change in pensions. That s why we ve developed this guide to help you understand auto enrolment and what you need to do.
2 AUTO ENROLMENT: STEP BY STEP SETTING UP AUTO ENROLMENT. STEP ONE: NOTIFICATION OF STAGING DATE The Pensions Regulator (TPR) is responsible for this. TPR will write to you 12 months before your staging date to inform you of your auto enrolment duties and to confirm your staging date. You can check when your staging date is by using TPR s staging date calculator at www.tpr.gov.uk/employers/tools/staging-date You will need your PAYE reference number. STEP TWO: CALCULATING THE COST OF AUTO ENROLMENT It ll help you to get an understanding of how much auto enrolment will cost you, considering the increased number of employees joining and the contributions you ll be making. We ve developed an employer impact assessment tool to help you calculate these costs. All you need to do is provide the following details for all your employees and the calculator will determine the total annual cost. Date of birth Total earnings Pensionable earnings Retirement age Contributions These costs can be calculated using the qualifying earnings and contribution percentages that are specified in the regulations, or you can specify a different contribution basis, at least as generous. You can also group your employees into different populations if you re planning on making different levels of contributions for different groups of employees. Things to think about Are you planning on phasing your contributions over the first few years you re auto enrolling? If so, you can amend your contribution basis accordingly when using the employer impact assessment tool.
AUTO ENROLMENT: STEP BY STEP 3 STEP THREE: DESIGNING YOUR SCHEME Your Employee Benefits Consultant (EBC), Financial Adviser and/or you are responsible for this. You ll need to agree your scheme design before selecting your provider to ensure it is appropriate for your employees and can be administered correctly. To do so, you ll need to consider the following areas: Type of pension scheme We offer three options: contract, own trust or master trust. You can find out more about our options through your usual Legal & General contact. You may wish to opt for different pension products for different employee populations. Contribution basis You might decide to offer all of your employees the same contribution basis. Alternatively, you may want to offer different tiers of contributions. For example, you might want to reward senior staff or those who pay in more to their pension with higher contributions. Are you going to phase your contributions or will you make full contributions from day one? Alternatively, you might wish to stick to your current contribution levels if they meet regulatory requirements. Phasing contributions In order to ease the implementation of a workplace pension scheme the Government has made an allowance in the regulations for employers and employees to start paying contributions to the pension scheme on a phased (increasing) basis. Refer to the Contributions section of our Auto Enrolment Explained guide for more information. Certification Auto enrolment introduces the option of making contributions based on an earnings band rather than from the first pound. If you don t want to use this earnings band you ll need to certify your contribution basis as one of three contribution models. Refer to the Contributions section of our Auto Enrolment Explained guide for more information. Salary definition Are you going to take contributions from basic pay only or will you include other earnings, such as shift pay, bonus, overtime and commission? Or are you adopting the qualifying earnings definition given in the regulations? Salary sacrifice If you want to operate salary sacrifice are you going to offer it before auto enrolment or after? Those who accept salary sacrifice before auto enrolment will be voluntarily joining the scheme and will be considered as opting in early. You will still have a duty to enrol those eligible jobholders who don t accept salary sacrifice. Investments You need to decide on a default investment option for your employees pension funds to be invested in automatically. You can choose our default option or you may wish to look into our other investment options. You may also refine the investment options for those employees who wish to take control of their investments. We offer a wide range of investment options that can be tailored to meet your specific requirements. Speak to your usual contact at Legal & General for more information. STEP FOUR: SELECTING YOUR PENSION PROVIDER Is your existing pension scheme a qualifying scheme for auto enrolment or could it become one? You may wish to use your existing pension arrangement, in which case you must ensure it s sufficient to meet the qualifying scheme rules. To find out more refer to the Qualifying Pension Schemes section of our Auto Enrolment Explained guide. Speak to your usual contact at Legal & General to discuss how we can support you.
4 AUTO ENROLMENT: STEP BY STEP STEP FIVE: REGISTERING YOUR PENSION SCHEME Once you ve selected your pension provider and scheme, you ll need to register with TPR. STEP SIX: DETERMINING THE ELIGIBILITY OF YOUR EMPLOYEES Your Human Resources/Payroll department is responsible for this. You need to assess your workforce and determine who needs to be auto enrolled. For example, who is: An existing pension scheme member (and what are their contributions) An eligible jobholder A non-eligible jobholder An entitled worker For more information about employee eligibility and what the above terms mean refer to the Who is eligible? section of our Auto Enrolment Explained guide. STEP SEVEN: ALLOCATING PENSION SCHEMES AND CONTRIBUTIONS Your Human Resources/Payroll department is responsible for this. Having divided up your employee population into their relevant categories, you need to decide how you wish to treat them with regard to contributions. For example, are you going to offer each category the minimum requirements as set out by regulations? Or will you offer each category the same contribution rates? Here you ll need to consider: Are you going to maintain your existing scheme for its current members? Scheme allocation are you offering more than one pension scheme? Which category of worker will be allocated to which scheme? Contribution basis what level of contributions will you make for each category of worker? STEP EIGHT: POSTPONEMENT You may postpone auto enrolment for up to three months. This can help to ease the cost of contributions but also helps if you employ temporary or low paid members of staff whose earnings may spike at certain times of the year. Postponement can only be used for a worker on certain dates: the employer s staging date, for any workers employed on their staging date the first day of employment, for any worker starting employment after the employer s staging date the date an employed worker becomes an eligible jobholder after the employer s staging date To exercise the choice to postpone auto enrolment, you must issue your employees with a postponement notice. See step three of the Enrolling your employees section on page 6 for more information.
AUTO ENROLMENT: STEP BY STEP 5 ENROLLING YOUR EMPLOYEES. STEP ONE: INFORMING YOUR EMPLOYEES ABOUT AUTO ENROLMENT You need to communicate about auto enrolment and what it means to each of your employees. The following communications must be sent to your employees: A waiting period notice to all eligible employees, no more than six weeks after the waiting period starts, if applicable. An enrolment notification, no more than six weeks after an employee becomes eligible, to explain what s happening, how it will affect them, and what their options are. Notice of the right to opt in or join the pension scheme to non-eligible jobholders and entitled workers, no more than six weeks after an employee becomes eligible. Notice to members of an existing qualifying workplace scheme about auto enrolment confirming that it doesn t affect them, no more than two months after their staging date. Rather than separate tailored communications, you may wish to send a single generic communication to all of your employees stating: the different types of rights, what they mean and how they will affect each individual. This will then show the employee which category they fall under, so reducing any risk of providing misleading information in circumstances where an employee may change category. We ve created some template communications, which you could use to create your employee communications. Speak to your usual contact at Legal & General for a copy. STEP TWO: PROVIDING INFORMATION ABOUT THE PENSION SCHEME You and your pension provider are responsible for this. Under Government regulations pension scheme information must be provided before a person joins. Your employees will need to have access to this information before they are enrolled to ensure they can make an informed decision about staying in the pension scheme or opting out. We ll provide this information either in print or online but it s important that you direct your employees to it to ensure they make the right decision about staying in the pension scheme or not. STEP THREE: COMMUNICATING POSTPONEMENT If you re postponing enrolment for those employees who are eligible jobholders and therefore eligible to be automatically enrolled, you ll need to send them notice of this within six weeks of them becoming eligible. Refer to appendix three in our Auto Enrolment Explained guide to find out more about the information that has to be provided.
6 AUTO ENROLMENT: STEP BY STEP STEP FOUR: ENROLLING YOUR EMPLOYEES Your Human Resources/Payroll department is responsible for this. At this stage, your HR or Payroll teams will need to inform your pension provider of all employees who need to be enrolled. We currently operate a system called Manage Submissions where you can upload details of new joiners on a regular basis. We can then organise their enrolment into the pension scheme. Things to think about If you have multiple schemes with different providers you should be aware that the models through which you transfer this information may be different. STEP FIVE: ISSUING THE ENROLMENT NOTIFICATION Your employees must be provided with a notification of enrolment on being enrolled into the pension scheme. You re required, by legislation, to provide the enrolment notification. We can provide the enrolment notification to your employees on your behalf but you are still legally responsible for this action. We ve worked on our enrolment notification taking it through two rounds of customer research to determine the best format and design, how best to present information, and to ensure that it s opened, read and understood. If you would like to have a look at our enrolment notification speak to your usual contact at Legal & General. STEP SIX: REVIEWING ENROLMENT Your employees are responsible for this. After being enrolled your employees will need to review their enrolment details, including their personal details, the scheme they ve been enrolled into and the relevant contributions, to decide whether they ll stay in the scheme or opt out. The employee can review the details included in our enrolment notification and, by using our online application WorkSave Choice, they may review their full personal details and make amendments online if needed. Once outside the opt-out period, the employee would need to provide evidence (such as birth or marriage certificates) every time they d need to make any corrections.
AUTO ENROLMENT: STEP BY STEP 7 STEP SEVEN: OPTING OUT Your employees and your pension provider are responsible for this. Employees who don t want to remain in the pension scheme following auto enrolment need to opt out within one month of being enrolled or of receiving their enrolment notification. The form to opt out must normally be obtained from the pension provider. Employers may not influence their employees decisions. If we provide our enrolment notification to your employees on your behalf, we ll direct them to WorkSave Choice, where they can opt out online. Employees who do not have internet access and wish to opt out can telephone our helpline to request an opt out form. STEP EIGHT: REFUNDING CONTRIBUTIONS If an employee opts out of the pension scheme within one month of enrolment and contributions have already been collected, then these must be refunded. For pension arrangements set up on a Pension Tax Relief At Source (PTRAS) basis where contributions have already been sent to us, we ll refund the contribution to you and you ll need to return it to the employee. For employer contributions on PTRAS based pension arrangements and employee and employer contributions received on non-ptras pension arrangements, refunds will be batched and refunded to you on a pre-agreed frequency. If an employee chooses to opt out after the first month has passed, all contributions must usually remain in the pension pot until the employee takes their benefits. Things to think about You may wish to hold on to your employees contributions throughout the opt-out period. This will help to speed up any refunds to your employees.
8 AUTO ENROLMENT: STEP BY STEP ONGOING MANAGEMENT. PROVIDING GENERAL EMPLOYEE COMMUNICATIONS You may want to provide general communications to support your employees throughout their auto enrolment journey and after it. For example: posters presentations guides on auto enrolment online tools We ve developed a selection of tools and materials to support you and your employees with this. Speak to your usual Legal & General contact to find out more. MANAGING CONTRIBUTIONS Your Human Resources/Payroll department is responsible for this. You ll need to manage any varying levels of contributions on an ongoing basis to ensure your employees are allocated the correct amounts depending on their situation. CALCULATING CONTRIBUTIONS Your payroll department or your pension provider will need to ensure your contributions are calculated correctly in line with the following: your contribution basis frequency of contributions categories of your employees and their incomes
AUTO ENROLMENT: STEP BY STEP 9 MAKING CONTRIBUTIONS Your contributions, alongside your employees, will be made to your pension scheme provider. You should provide details of the contributions for each of your employees to us using our system called Manage Submissions. You just need to provide a spreadsheet of the relevant contribution details and upload it to Manage Submissions. We validate the details on your submissions against the details we hold on our internal system to ensure the information you provide is correct. Any errors will be flagged to you on screen. Things to think about If you have multiple schemes from different providers then you need to be aware that the methods by which you transfer this information may be different. So, you ll need to have the appropriate transfer of information available for each method. MAKING INVESTMENTS Your pension provider is responsible for this. Your pension scheme provider will be responsible for investing your employees pension contributions. Your scheme must have a default fund for your employees into which their contributions will be automatically invested. They can re-invest elsewhere depending on what investment options you decide to offer them. We offer a variety of investment options, including: Core funds You can select a smaller set of funds from our full range to make your employees investment decisions simpler and easier. Governed funds A sub-set of the full range, currently over 50 funds. These funds go through regular quality checks and if we believe that they no longer have the ability to perform as expected they may be removed from the governed fund range. Lifestyle profiles These automatically change the funds members are invested in, depending on the length of time until a member s selected retirement date. As they get closer to retirement, the funds they invest in will automatically switch to less volatile funds, with the aim of protecting the value of the plan until their selected retirement date. ONGOING ELIGIBILITY ASSESSMENT You need to continually assess your employees to take into account those who become eligible jobholders due to a salary increase or because they ve reached their 22nd birthday. You must also manage the joining of those who are not automatically enrolled on an ongoing basis. So, you must: Continually assess the eligibility of your existing non-eligible jobholders, entitled workers and new hires Communicate their right to join the pension scheme Facilitate their application to join the pension scheme, if appropriate Provide your pension provider with the relevant details For those who have opted out of your pension scheme, you must give them the opportunity to opt back in at least once a year. You have a continued responsibility to automatically re-enrol all eligible staff not currently in your pension scheme every three years from your staging date.
10 AUTO ENROLMENT: STEP BY STEP SCHEME GOVERNANCE You and/or your adviser or scheme trustees are responsible for this. Pension governance means governing or managing a pension scheme to ensure it meets the needs of its members. Good governance creates a strong foundation on which to build for the future. It might be worth setting up a governance framework to facilitate decision-making and to ensure that your employees concerns and needs are addressed. Speak to your adviser or your usual contact at Legal & General for more information and support. CERTIFYING YOUR SCHEME To ensure your scheme is set up appropriately for auto enrolment and that you re making contributions which are in line with the regulations, you need to certify your pension scheme on a regular basis. For more information relating to the certification of pension contributions please visit www.gov.uk/government/ uploads/system/uploads/attachment_data/file/307083/money-purchase-schemes-guidance.pdf. You can certify your scheme for up to 18 months. You should keep a copy of this certification on file. AUTOMATIC RE-ENROLMENT Roughly every three years after your staging date, you need to repeat the enrolment process for eligible workers who are not in the scheme. This is to encourage those who may have opted out previously to join the pension scheme. As with normal enrolment, we can provide the enrolment notification to your employees on your behalf.
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