Live chat: Workplace pensions reform – are you ready?

This live chat took place on 30 September 2014

Under the workplace pension reforms all employers, including charities and voluntary sector organisations, will be required to automatically enrol certain employees into a workplace pension scheme and make contributions to this. They must have this workplace pension scheme in place no later than 1 February 2018 and there are staging dates for different size organisations.

Guide to organisation staging dates by PAYE scheme size (PDF, 250KB)

Regardless of your current pension provision, you should start planning for auto enrolment at least 9-12 months before your staging date as it is essential to have all arrangements in place and to budget for cost implications.

There will be penalties for non-compliance and this is being actively monitored by the Pensions Regulator. Also, don’t assume a current pension provider will be able to manage your auto-enrolment responsibilities.

Our Trusted Supplier, Lucas Fettes (financial advisers) answered your questions to help you understand the pensions reform and prepare for the necessary changes.

Expert panel

Andrew Campbell, Employee Benefits Manager, Lucas Fettes & Partners

Andy joined Lucas Fettes & Partners in 2008. He has worked and advised employers regarding workplace pensions for fifteen years and is qualified as a Certified Financial Planner.

Andy’s role includes technical support and strategic development for Lucas Fettes in the workplace pension market, providing advice and project management to employers to meet their Automatic Enrolment duties and the creation and delivery of employee communications.

Emma Welling, Automatic Enrolment Coordinator, Lucas Fettes & Partners

Emma has worked in Financial Services for over 10 years specialising in Workplace Benefits. Emma has conducted varying roles relating to workplace pensions including administration, relationship and bid management and automatic enrolment support.

In her current role as automatic enrolment coordinator, Emma supports employers through every step of their Automatic Enrolment duties offering guidance and information to help employers in their decision making process.

Questions and answers

This live chat took place on 30 September 2014 – questions are no longer being answered 

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31 Responses to Live chat: Workplace pensions reform – are you ready?

  1. Lesley Soane says:

    Hi,

    Can you tell me if as an employer of 37 people we would have to set up and fully enrol each employee into our pension scheme (currently only 10 people wish to be in our pension scheme) before they can opt out please?

    Many thanks

    Lesley

    • Emma Welling says:

      Hi Lesley,

      If your employees meet the criteria for auto enrolment, then yes, you would need to enrol these employees into your pension scheme before they can opt out.

      Please remember you must check with your existing scheme supplier that the scheme can be adapted to meet AE (Automatic Enrolment) requirements.

      Thanks

  2. Anne says:

    • If organisations maintain their payments into private pensions, how do they monitor the employee’s monthly contributions?
    • If this is through payroll and you have more than one private pension provider (more that likely if more than one employee) will this add to the costs?
    • The current rates start at 1% from the employee and 3% rising to 5% from the employer. But if an organisation already pays 5% does the employee have to pay anything until the employer’s contribution reaches 5% (the total will be eventually 8%)?
    • The simplest and cheapest solution may be to open a new pension scheme that conforms to the new requirements, but what about employees with private pensions, are they frozen or transferred to this one?
    • Will employees be able to transfer pension pots into the new scheme?
    • What is the comparison of costs to run the different schemes?
    • Who’s responsible for the comparison, employer, employee, financial adviser?
    • In order to prevent claims if the chosen pension provider fails employers will have to advise all employees to see a financial adviser before committing to the scheme – more cost to the employee. Would you agree?
    • There is always the opt out – but if an employee opts out, I suggest contractually the employer will still have to pay their 5%. Would you agree?

    • Andy Campbell says:

      Hi Anne,

      We will now answer each bullet point as you have listed them…

    • Emma Welling says:

      Hi Anne,

      Question 1 – If organisations maintain their payments into private pensions, how do they monitor the employee’s monthly contributions?

      On the assumption that the private pension can be made qualifying then we would suggest that contributions are deducted via payroll. This is the only effective way this can be monitored.

    • Emma Welling says:

      Question 2 – If this is through payroll and you have more than one private pension provider (more that likely if more than one employee) will this add to the costs?

      We would not necessarily expect to see any additional routine costs aside from potential additional administrative work.

    • Emma Welling says:

      Question 3 – The current rates start at 1% from the employee and 3% rising to 5% from the employer. But if an organisation already pays 5% does the employee have to pay anything until the employer’s contribution reaches 5% (the total will be eventually 8%)?

      The minimum contributions for employers and employees starts at 1% matched based on qualifying earnings (a band of their annual earnings falling between £5,772 and £41,865 2014/2015) these contributions would need to increase to 2% from the Employer and 3% from the Employee in 2017 and by October 2018 would need to be at a total of 8% (3% Employer and 5% Employee).

      As long as the Employer is making their minimum contribution at all times if this exceeds the total contribution required an Employee need not make up the shortfall until such a time as the total contribution falls short of the required minimums.

    • Emma Welling says:

      Question 4 – The simplest and cheapest solution may be to open a new pension scheme that conforms to the new requirements, but what about employees with private pensions, are they frozen or transferred to this one?

      Whilst ongoing contributions may need to be directed towards a new scheme as part of Automatic Enrolment it is up to an individual to choose what they do with their accumulated funds held in private pension plan. These could be transferred to a new arrangement if the new plan gave a better outcome for the individual.

    • Emma Welling says:

      Question 5 Will employees be able to transfer pension pots into the new scheme?

      Yes, in most cases employees can transfer benefits into the new arrangement, employees should look into if the transfer would offer them a better outcome by comparing the plans before instructing any transfer.

    • Andy Campbell says:

      Question 6 – What is the comparison of costs to run the different schemes?

      The charging basis for pension members usually includes administration and fund management charges – these can be compared between the ‘old’ scheme and the ‘new’ arrangement to identify which offers better value – these charges will vary from scheme to scheme – there may also be other costs included on individual arrangements.

      Whilst charges are important, there are a number of other factors which may be important to individuals when comparing schemes (e.g. fund choice)

    • Emma Welling says:

      Question 7 – Who’s responsible for the comparison, employer, employee, financial adviser?

      This depends hugely on the circumstances – we would always suggest that where possible a financial advisor is involved; the costs associated in such comparisons are typically made on a fee basis.

      These fees are often met by employees electing to transfer, however in many cases we have found that an employer is willing to cover the costs of this service where they have made the decision to redirect contributions into a new scheme for individuals.

    • Emma Welling says:

      Question 8 – In order to prevent claims if the chosen pension provider fails employers will have to advise all employees to see a financial adviser before committing to the scheme – more cost to the employee. Would you agree?

      If an employer has conducted initial and ongoing due diligence to ensure they are partnering with a suitable supplier the need for individual advice would not be required.

      For those employees with individual arrangements in place it may be appropriate for them to seek independent advice from an advisor.

    • Emma Welling says:

      Hi Anne,

      Many thanks for your questions we hope you have found our responses helpful.

      With regards to your last comment please could I ask that you contact us at the below email address, where we can discuss contractual arrangements and how these work with automatic enrolment.

      ncvo@lucasfettes.co.uk

      Many Thanks

      Emma

  3. Hello and welcome to our live chat. My name is Marie and I am the moderator for today.

    Shall we start with our panelists introducing themselves?

    Don’t forget to hit refresh to get the latest comments.

  4. Andy Campbell says:

    Hi,

    Great to be here today with Emma Welling – we are happy to answer as many questions as we can to help you !

    If we do take a little while to reply, please hang in there we will be answering other questions.

  5. Emma Welling says:

    Hello all,

    Further to Andy’s comment we look forward to hearing from you with all of your Automatic Enrolment questions.

  6. Tom Arnold says:

    Hi Andy and Emma

    Is there an option to opt out of auto enrolment?

    Thanks

    Tom

    • Andy Campbell says:

      Hi Tom,

      Yes workers have right to opt-out within a month of being enrolled (and receive back any contributions which may have been deducted from their pay).

      • Kat C says:

        Hi Andy

        If they want to opt-out at a later stage, can they still do so?

        Thanks

        • Emma Welling says:

          Hi Kat,

          After the one month opt out period ends employees can cease membership of the plan by informing their employer they no longer wish to be in the pension scheme.

          In most cases if you cease contributions to the plan outside of the opt out window you will be unable to have a refund of any contributions already paid to the pension supplier.

  7. Christine Bell says:

    We only have one employee – what’s the most cost effective way for our charity to adhere to the legal requirements of auto enrolment?

    • Andy Campbell says:

      Hi Christine,

      There are a several costs to consider – I’ll break these down assuming your employee meets the requirements to be enrolled:

      1) pension contributions – both you and your employee will need to pay a 1% contribution (based on your employees ‘qualifying earnings’

      2) These contributions will increase – see Emma’s post Anne for increases

      3) Pension supplier selection – you can go direct to a pension supplier of your choice to set up your AE scheme rather than using advisers – most pension suppliers do not charge an employer fee to run the scheme

      4) All employers will have compliance duties from their staging date which they would not have had previously – there may be costs associated with this if a third party undertakes this function – that said it is possible for employers to manage their compliance in house and if necessary manually

      I hope this helps!

  8. Chris T says:

    What do my employees need to do???

    • Emma Welling says:

      Hi Chris,

      It is important for Employers to ensure that they provide clear communications to Employees informing them of the impact of AE, their options and what will happen next.

      Assuming this has been done then the most important thing for employees to do is to read these communications and make a decision as to if they wish to remain in the pension scheme.

  9. Lillian Beckett says:

    Do you have a check list of things we should to best prepare ourselves? I’m the only one working on this, with not much time.

  10. Andy Campbell says:

    Hi Lillian,

    Please visit our website where we have a breakdown of the various employer duties – I do also have a PDF step by step guide, which I cannot post here but would be happy to supply after the session has closed.

    If you’d like this please send your request to ncvo@lucasfettes.co.uk

  11. James Evans says:

    I’d like to be able to raise awareness with staff. Have you got any ideas of how to engage staff?

    • Andy Campbell says:

      Hi James,

      Our proven method of engagement involves at say six months out, advising staff in writing when the new duties are to be effective from (i.e.your staging date) and that you will contact employees again nearer the time with further details.

      At three months out from staging you can write again to confirm who the pension supplier is, details of the scheme features and benefits and what the contribution rates are.

      Some employers will then choose to deliver workplace presentations to staff once detailed information about the scheme has been provided. This can include both education about future income in retirement as well as the impact of automatic enrolment, opting in and out, information on contributions and information about the scheme.

      You may also wish to use other methods of communications (e.g. posters, online etc)

  12. Thanks everyone for taking part, especially Andy and Emma.

    This discussion will remain available so do continue to post, however our expert panel may take a little longer to reply.

  13. Andy Campbell says:

    On behalf of Emma and myself, many many thanks for your questions and interest.

    We’ve really enjoyed running this session.

    If you have any further queries or questions, please feel free to contact us on

    ncvo@lucasfettes.co.uk

    Or

    Call us on 0845 357 8910

    Thanks and speak soon
    Andy