automatic enrolment into pensions schemesrevised 24/04/15
for all Unitarian congregations and other bodies
guidance notes about automatic enrolment (AE)
Other papers on the same site as these notes are:
the chief officer’s letter of April 2015;
a shortexplanation of the general principles of AE;
note for the MPF solicitor’s presentation at the GA meeting on 31 March 2015;
a summary of the penalties for non-compliance; and
the forms listed in G27 below.
AThe most likely situations are:
1you have a minister or lay pastor or are likely to have one in the future; and
2you have one or more paid employees, whether or not you also have a minister or lay pastor.
BiYou need to know:
1whether or not AE applies at all;
2your“staging date”, which is the date on which AE first applies to you;
3which if any of any people who work for you are “jobholders” and subject to AE;
4whether anyone else has AE rights, even though not a jobholder;
5how much you must pay in contributions;
6what to do; and
7what information must be given to whom and when.
See section G below for a guide to these questions.
BiiThere will normally be three parts of the process.
1Ascertaining the staging date, which is point 2 above but to do it involves points 1 and 3.
2Making and implementing an AE plan.
3Dealing with TPR, including:
(a)at the start of the process, a point of contact must be established (para G24 below); and
(b)registering a declaration of compliance with TPR not later than five months after your staging date (paraG25 below).
CMinisters and lay pastors are workers, but not employees, and you must enrol yours into an AE pension scheme, even if she or he is a member of the Ministers’ Pension Fund (MPF). She or hemay opt out of your AE scheme, but you are not allowed to encourage opting out.
DAnyone else employed by you, whose age and pay in the categories in the table in E below, has the AE rights shown in the table. If you have such a person you could enrol her or him into an AE scheme such as NEST, but the alternative of a “qualifying” scheme (para 8 of the explanatory note) might be preferred. A personal pension plan, which the employee could choose, can be a qualifying scheme and, if the employee remains in the scheme, there will be no need for you to enrol her or him automatically into an AE scheme. If you do not have a minister or lay-preacher in the MPF, this alternative will reduce, but not wholly eliminate, the work to be done in connection with AE.
EThe table below shows three categories of persons affected by AE. The terms with the words “eligible, “non-eligible” and “entitled” are not staturory but were invented by TPR.They are:
1eligible jobholders, who must be enrolled and for whom you must pay contributions;
2non-eligible jobholders, who may opt-in,ie opt to be enrolled and, if they do, for whom you must pay contributions; and
3entitled workers, who have a right to join the scheme but for whom the employer is not required to pay contributions.
earnings / age 16 to 21 / age 22 to not over state pension age / state pension age to age 74A / above the earnings trigger (£10,000pa) / non-eligible jobholders / eligible jobholders / non-eligible jobholders
B / between amounts in A and C (from £5,824 pa to £10,000 pa) / non-eligible jobholders
C / under lower qualifying earnings limit (£5,824 pa) / entitled worker
These are the amounts in 2015/16. The £5,824 is the lower earnings limit for national insurance contributionsand is expected to be adjusted annually in line with the lower earnings limit.
GThe following questions and notes are intended to help you to answer the questions in section Bi above.
questions (or action to be taken) / answers and explanationswhether AE applies and staging dates
G1Does anyone, including a minister or lay pastor but not including contractors and professional advisers, work for you under a contract?
NBThis question might require you to consider or reconsider the legal status of people who payment of some kind for their services have not been treated as employees r taxed under PAYE. / NoAE does not apply to you and there is no need to continue these questions, but AE might apply in the future if you do employ anyone.
YesGoG2.
G2What is your PAYE reference number?
Click this address
then type your PAYE number into the box on the website of the Pensions Regulator (TPR) and follow the instructions. / This gives you your staging date.
jobholders – who must be or is entitled to be enrolled
G3Does whoever works for you satisfy both the following?
a)age 22 or over but not reached state pension age
b)paid at the annual rate of over £10,000
See the list and table in E above. / NoYou are not required to enrol the workerbut must give her or him notice. Go to G27
YesIn TPR-jargon this worker is an eligible jobholders and must be enrolled. Go to G11.
G4Does whoever works for you satisfy both the following?
a)age
i)16 to 21 (inclusive) or
ii)State pension age to 74 (inclusive)
b)paid at the annual rate of over £5,824
See the list and table in E above. / NoYou are not required to enrol this worker but must give her or him notice. Go toG27.
YesIn TPR jargon this worker is a non-eligible jobholders, who may require you to enrol her or him. Go to G11.
G5Does whoever works for you satisfy both the following?
a)age
i)16 to 21 (inclusive) or
ii)State pension age to 74 (inclusive)
b)paid at the annual rate of £5,824or less
See the list and table in E above. / NoAE does not apply to you and there is no need to continue these question, but AE might apply in the future if you do employ anyone or any present worker comes into the age and pay categories.
YesIn TPR jargon this worker is an entitled worker, who may require you to enrol her or him, but you will not be required to pay contributions. Go to G11.
G6Monitor each present and future workerand the changes in the pay thresholds. / Necessary so that you know when she or he meets the above criteria for AE.
ministers and lay-pastors
G7Do you have a minster or lay pastor who is or will become a member of the Ministers’ Pension Fund (MPF)? / NoThis section does not apply to you, but might in the future.
YesShe or he is subject to AE. The MPF is not a qualifying scheme and therefore membership does not provide an exemption from AE. Go toG8
G8Are both you and the minster or lay pastor willing to pay two sets of pension contributions? / NoIt is for the minister or lay pastor and not you to whether to opt out of your AE scheme.
YesThe minister or lay pastor will be an active member of both the MPF and your AE scheme.
G9If you have a joint, shared or part time minister or lay pastor, are you or is the other congregation the “lead employer”, ie the one which pays the stipend and recovers the share of the costfrom the other employer? / NoGo toG10.
YesThe “lead employer” will be the congregation responsible for AE. The contributions will be shared between the congregations in the same way as the stipend and other payments.
G10If the answer toG9 is No, it is probable that each congregation is a separate employer. It this so? / No(or not sure) You need to investigate the legal relationship in detail in order to ascertain who is responsible for what.
YesEach congregation is responsible for AE. In some cases this might result in the minister’s or lay pastor’s pay being less than the AE thresholds for one or more of the congregations, so that AE would not apply. The table in section Eabove applies to each appointment separately. If so go to G3
what pension scheme?
G11Decide what kind of scheme to provide / The most straightforward choices for small employers are one of the following two types of money purchase scheme:
a)a personal pension as a qualifying scheme; or
b)a centralised occupational scheme such as NEST as an AE scheme.
See paras 8 and 10 of the explanation.
G12Discuss whether an employer or worker to whom AE applies might effect or already have a personal pension scheme that could be a qualifying scheme. / If the employee agrees, this will be simpler and involve less administration than AE (see para 8 of the explanation).
See the forms in G27 (form 6).
G13Take any financial and HR advice needed. / None of the GA, the MPF or the MPF’s solicitor is permitted to give financial advice.
payroll accounting
G14Decide whether and if so what payroll accounting system to use or what system is used by your payroll agent. / The smooth running of AE is largely dependant on your payroll system being compatible with your AE scheme’s system.
contributions
G15There are four basis of calculating contributions.
a)8% of qualifying earnings (para 5 of the explanation).
b)9% of pensionable earnings if they are equal to or greater than basic pay.
c)8% of pensionable earnings if they are equal to or greater than basic pay and basic pay is on average at least 85% to total pay.
d)7% of total pay.
Only a), the default basis and d) are likely to be relevant. / The basis in a) applies automatically unless you decided to use one of the alternatives in b), c) and d)
The basis in b) and c) are to deal with fluctuating earnings and are mostly likely to be applicable where the employees’ pay depends on commissions and the like.
The illustration in para 4 of the explanation shows basis a) and d).
The basis in d) is the simplest because thereis no need to monitor and take account of the lower and (if highly paid) upper earnings limits, but might cost more that the basis in a).
G16Note the dates on which the present reduced AE rates will increase. / See the tables of contributions rates in para 4 of the explanation.
G17Decide whether to pay higher rates of contribution than the above and if so how much.
enrolment
G18It is good practice, but you are not required, to inform your workers about AE in advance of it coming into force. / See the forms in G27.
Forms 1 and 2 are for this purpose.
G19Decide whether or not to defer the AE date by up to three months and if so notify the worker, who can require you to enrol her or him before the deferment date. / Deferment is probably too much trouble.
If you do defer enrolment, use form 7 in G27.
G20All eligible jobholders must be enrolled automatically into an AE scheme on the employer’s staging date or later when the worker qualifies for AE, unlessdeferred. / To be done on line on the NEST or other provider’s website.
G21Notify Jobholders that they been enrolled automatically into an AE scheme not later than six weeks after the jobholder’s AE date / See the forms in G27.
See also G18 above. If possible issue for 3 in advance with the letter in form 2
G22If the employer has non-eligible jobholders or entitled workers the appropriate notices must be sent / See the forms in G27.
The relevant forms are 4 or 5, which if possible should be issued with the letter in form 1.
opting out
G23Anyone enrolled automatically into a pension scheme has a right to opt out, but must be re-enrolled after three years, when they can opt out again. The process will be repeated every three years On opting out any contribution already paid will be refunded. / The notice of AE in G27 above must include notice of the right to opt out.
Members of MPF, might be expected to exercise the right to opt out of AE schemes, but cannot do so in advance of being enrolled.
You are not permitted to induce a member of the MPF to opt out may inform her or him of the facts, eg by providing a copy of the MPF’s solicitor’s note for his presentation at the GA meeting on 31 March 2015, available on the same website as this note.
regulation
G24The Pensions Regulator is responsible for regulating AE, keeps a register of employers, monitors their compliance and requires reporting by employers. / You will be or perhaps already have been contacted by TPR for registration.
A summary of the penalties for non-compliance is on the same website as this guidance.
G25Registration with TPR. / As soon as possible on line at the following this link:
G26Declaration of compliance / Not later than five months after the staging date at the following link:
forms
G27The regulations in force about AE specify in details what information must be given to whom and when. You have a choice (unless you wish to prepare your own) of the letters and forms:
a)on TPR’s website;
b)provided on line by NEST or your other AE scheme; and
c)provided on this website and listed on the right; or
d)a combination of the above but docs 01, 02 and 06 will probably be more convenient than the corresponding of TPR’s or your provider’s websites. / Specimen lettersand notices available on the same website as this guidance.
Form 1advance letter to workers to whom AE does not apply unless they request to be enrolled.
Form 2advance letter to workers who will be enrolled automatically.
Form 3notice workers who have been or will be enrolled automatically.
Form 4notice to entitled worker (no employer contributions).
Form 5notice to non-eligible jobholder (opt in)
Form 6notice to workers who are members of a qualifying scheme.
Form 7notice to workers if AE is deferred.
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