Recently HR Solutions invited a special guest speaker from Anstee & Co Financial Designers to lead a session on Pension Auto-Enrolment Issues. This article is a summary of the questions we were asked along with the answers given by guest expert Darren Amos from Anstee & Co.
Answers to Pension Auto Enrollment Questions
It is generally publicised that minimum total contributions will increase to 8%. However, for avoidance of doubt, can you confirm that it is possible that the total contribution from April 2019, could be 7% in some situations and confirm what those situations are?
If you are only using Qualifying earnings (as many are) then the minimum level is 8% of which at least 3% is from the employer and the balance from the member. (e.g. 3% + 5%, or 4% +4%, or 6% + 2% etc.)
If you are using total earnings there are 3 different options, depending on what you agreed at outset.
One of these is still 8% (3% +5%) based on all basic salary earnings (not just QE band) as long as any bonuses/overtime etc. do not exceed 15% of total pay in the year.
The second option is 9%. This increases employer contributions to 4% and members 5%. this is also based on all basic salary, but it doesn’t matter if bonuses etc. exceed 15% of total.
The final option, which is actually the answer to your question is 7% with 3% from the employer and 4% from the member. This is based on ALL earnings, salary, bonus, overtime etc.
Are penalties issued to employers, or the pension provider, or both?
All responsibilities lie with the employer, so all penalties apply to them.
The providers are obligated to report any breach they are aware of (e.g. Late payment of contributions, not enrolling someone etc.)
Penalties include fines, and making employers pay all contributions missed for the member.
Providers can also be fined if their systems fail sufficiently to put employers in breach (eg NOW failed to collect contributions)
Can you confirm what a master trust scheme is and how it differs to other schemes?
A MasterTrust is an Occupational Pension scheme for multiple non-associated employers, in which each employer is included in a separate section of the MasterTrust.
This is designed to help reduce operating costs, and improve governance. Members funds are part of the collective, but ring fenced.
The most common alternative is a Group Personal Pension. This is a group of individual personal pensions where the individual funds belong to the member and can be easily moved if they change employers. By bulk buying as a group you gain reduce costs and better governance, just like MasterTrusts, but the arrangements are more flexible for the member.
If it is possible for employees in an existing master trust scheme to have their total contribution increase to 7% (rather than 8%), and the master trust scheme did not meet the new standards by 31st March, would employees have to be entered into a new scheme at a total contribution rate of 8%?
Good question! In theory any employers scheme can elect to use the 7% certification option (or 8% or 9%) based on ALL pay instead of QE.
However, some MasterTrust providers are not geared up to offer any option other than QE, as their IT systems were not designed for it.
So yes, if you then transferred to another Mastertrust option you might find it reverts to 8%, and probably based on QE only. Transferring to a GPP allows you to continue as you wish
How would you advise an employer to find out if their scheme is fit for purpose?
If all you want to know is can I still use it then firstly ask your provider if they are going for authorisation.
Then check the TPR list when it is announced to see if they were approved. If however you want to know if it will provide the best member outcomes for their future then you need to speak to an independent financial adviser who can consider all of the issues.
Many “advisers” employed by benefits consultants are not qualified pensions advisers, and these can be identified easily as they are not authorised to advise members.
This is because they do not operate as authorised and regulated advisers under FCA rules.
They are unlikely to know the full range of options available in the markets when compared to an IFA who is authorised and regulated by the FCA.
An IFA may offer several alternatives, dependant on what you want to achieve.
The level of contributions is still agreed by you.
Payroll Services and Pension Administration
In conjunction with HR Solutions’ Payroll service, once you have chosen and been set up with your pension provider, we can offer the following Pension Module to you, this will automate the process and eliminate the ongoing day to day administration burden of Automatic Enrolment in 3 key areas:
- Automated Assessment of Employees
Assess the entire workforce against criteria, categorisation – assigning to Eligible Jobholder, Non eligible Jobholder and entitled Jobholder, Enrolment, Postponement, Opt ins/Opt outs.
- Automated Data and Payments to Pension Provider
Data files, Data transfers, Pending and historic transfers, Payment files, Pending and historic payments.
- Automated communications to Employees
Creating the communication – individually addressed
Sending the communication – print or prepare email
Pending and historic communications – queuing of comms, date of sending and recording Sending Employee record – attaches letter/email to the employee record.
For Pension Auto Enrolment queries please contact:
Darren Amos at Anstee & Co Limited
Tel: 01536 483733
For Payroll and Pension Administration queries please contact:
Tel: 0844 324 5840