Auto-enrolment Designed for SMEs In association with The BlueSky Pension Scheme
T H E B L U E S KY PENSION SCHEME
Contents What is auto-enrolment?.....................................................3 Why was it introduced?........................................................3 What are your duties?...........................................................3 How does it work?................................................................. 4 Who is eligible?....................................................................... 4 Opting out.................................................................................5 How can the Fairstone Workplace Pension help?..... 6 About the scheme................................................................. 6 Our investment approach................................................... 6 Benefits of the scheme.........................................................7 How much does it cost?.......................................................8 How do you sign up?.............................................................8 Contact us................................................................................. 9
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What is auto-enrolment? One of the largest-ever shakeups in the history of UK pensions was introduced by the UK government in 2012 to provide wider access to pension savings. Auto-enrolment makes it compulsory for employers to automatically enrol eligible workers into a pension scheme, and then pay into the pension scheme on their behalf. The scheme is being phased in over time, with the aim of getting all eligible employees enrolled into a workplace pension scheme by the end of 2018.
Why was it introduced? It has long been recognised that most people aren’t saving enough for retirement and, as a result, may not be able to afford to live comfortably on just their State Pension. As people live longer, this is putting an increasing strain on the State benefits system, making private pension provision an increasingly important issue. Auto-enrolment started with the UK’s largest employers in October 2012. Now it’s the turn of the small to medium sized businesses (SMEs), with the aim of ensuring that all eligible employees are enrolled into a pension scheme by October 2018.
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“Auto-enrolment started with the UK’s largest employers in October 2012. Now it’s the turn of the small to medium sized businesses (SMEs).”
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What are your duties? If you have at least one worker, under the Pensions Act 2008, you will need to: •
Provide your workers with access to a workplace pension scheme that meets certain minimum standards
•
Automatically enrol eligible workers, whilst others can ask to join
•
Pay contributions into the retirement pots of your workers, depending on how old they are and how much they earn.
Communication is key You have a legal responsibility to let your workers know how the reforms affect them, even if they are not eligible for automatic enrolment. That means telling them: •
Whether they are being automatically enrolled or have the right to opt-in
•
Whether they are entitled to contributions from you and how much they will need to contribute
•
About the scheme you have chosen
•
When they will be affected
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How does it work?
Feb 2018 New Employers
April 2017
As an employer you need to make sure you have a workplace pension scheme in place by your staging date. The Pensions Regulator will write to you 12 months in
Employers with fewer than 30 workers
Jan 2016
advance of your staging date to help you prepare and put in place your chosen pension scheme.
Oct 2015
The Pensions Regulator has assigned a staging date to
Employers with 30
your PAYE number. If you have more than one PAYE
to 49 workers
reference, your staging date is normally based on the PAYE reference with most employees.
Aug 2015
If you haven’t received a letter, you can check your status using your PAYE number, using their website at: www.thepensionsregulator.gov.uk
April 2015
You can choose to postpone the date that you automatically enrol your workers by up to three
Employers with 50
months. However, you will need to be signed up and
to 249 workers
have a scheme ready to accept workers who ask to enrol, and your workers will have the right to opt-in on your actual staging date.
April 2014
Feb 2014 Employers with 250 workers or more
Oct 2012
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What if you miss your deadline? If you don’t already have a compliant scheme in place and you miss your staging date, The Pensions Regulator has the power to issue steep fines of £400 plus a daily fine of £50 for every day that you are not compliant and don’t have your workplace pension scheme in place. To date there have been over 600 fixed penalty notices issued. To ensure that your firm is not the next to be fined for non-compliance with the new rules, take steps now to prepare for your staging date.
“To date The Pensions Regulator has issued over £120,000 in fines for missed staging dates.”
Opting out
“Even if an employee has opted out, you have to automatically enrol them again after three years.”
Your employees will be able to choose to opt-out of your workplace pension scheme if they have been automatically enrolled. During the first full year of auto-enrolment, opt-out rates totalled around 10%. If they decide to opt-out within a month of being enrolled, any money they have paid in will have to be repaid to them. If they opt-out later on, any contributions will remain in their pension pot until they retire. If they continue to be eligible, you are obliged to re-enrol them after three years, although at this stage the employee can then choose to opt-out once again. They can also choose to opt back in.
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Making contributions Once your scheme is set up, a minimum percentage of each worker’s ‘qualifying earnings’ has to be paid into their pension pot. As the employer, you have to make contributions too and the government also makes a contribution through tax relief.
2015
2%
2019
8%
Qualifying earnings are your workers’ earnings in a year between £5,824 and £43,000, but these earnings figures may change each April. The legal minimum for all jobholders is to currently pay 2% of their ‘qualifying earnings’ into their pension. Of this you will have to pay at least 1%, but you can pay more if you want to. The legal minimum payment you are required to make as an employer will rise gradually over time to 8% of qualifying earnings from April 2019 onwards.
“The legal minimum you have to pay into your employees’ pension will rise gradually over time to 8% from April 2019.” If you already have a scheme in place, it is important that you contact the provider to confirm that it is an Automatic Enrolment compliant scheme. It may be the case that your existing scheme can be made compliant for existing members but not new joiners. If this is the case you will need to set-up a new scheme to either replace the existing one or to run alongside it.
With a scheme already in place you don’t have to use qualifying earnings to work out contributions for employees. You could use your existing definition of pensionable earnings or you might find it easier to use total pay. Unsure of what your minimum employer contribution is? You can find out online with The Pensions Regulator at: www.thepensionsregulator.gov.uk/employers/tools/ employer-contributions.aspx
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How can the Fairstone Workplace Pension help? With so many schemes out there, it can be difficult to choose the best option for you and your employees.
The Fairstone Workplace Pension is an employee benefits solution delivered by Fairstone Corporate Solutions in conjunction with The BlueSky Pension Scheme. Fairstone Corporate Solutions is part of the Fairstone Group – one of the UK’s fastest growing financial
“The Fairstone Workplace Pension is designed to take away the burden of auto-enrolment for SMEs by managing the process from start to finish.”
services organisations. The BlueSky Pension Scheme is part of the Corporate Pensions Trust, a multi-employer defined contribution only master trust, HMRC Pension Scheme Tax Reference 101704689. We aim to take away the burden of auto-enrolment for SMEs by managing the process for you from start to finish. The scheme is tailored specifically to help SMEs comply with the new laws in the simplest, smartest and most cost-efficient way possible.
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About the scheme The Scheme is run on a non-profit basis, is one of the largest master trusts in the UK and has been in operation for nearly 30 years.
Investment approach The investment approach has been specifically designed to represent ‘best practice’ in the context of automatic enrolment. Key features include:
The scheme aims to achieve the highest standards of governance and independence, as informed by The
Dynamic and sophisticated risk management that takes account of changing economic and market conditions
Efficient fund structure that reduces the cost of administering the funds
Professionally constructed, well diversified portfolios to give members access to a wide range of asset classes
High levels of investment governance around the default fund to protect your members’ money
Focused range of fund choices for workers who want to choose their own investments.
Pensions Regulator’s guidance. It has a Governance Committee to represent the best interests of the members and has oversight of, but not responsibility for, Trustee decisions. Like NEST, the government-backed scheme, TBPS uses highly governed age-based funds that simplify the savings journey for members, so that investments remain suitable on an ongoing basis. Unlike NEST, there are no restrictions on contributions, transfers in or transfers out.
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Highly governed age-based default investment strategy designed for all life phases
Investments are held through the AXA Wealth Corporate Trustee Investment Plan which includes:
Risk Profiled Funds: Bluesky Passive Funds
Target Date Funds: BlueSky age-based funds managed by AllianceBernstein
Ethical Global Funds: BlueSky Ethical Fund Sharia Fund: Bluesky Sharia Fund
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Benefits of the scheme If you’re a small business owner who is not a pension expert but is cost-conscious and very busy running your business, the Fairstone Workplace Pension could prove the right solution for you.
The scheme is ideal for you if you want: Our experts to guide you through the process of
setting up your scheme
To know you have met all the legal requirements To have one of the most cost-effective solutions
for SMEs available
It is non-advised, easy to use and provides you with a dedicated account manager to guide you through the process of implementing the scheme and beyond.
As part of the scheme we offer:
Dedicated experts to work with you
Complete scheme set up
Access to an online portal for employees
Online employer tools
Liaison and training with your payroll provider
Employee communication
Full compliance management
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How much does it cost? Charges for pension schemes vary depending on the investment and administration costs of the scheme. The structure of charges also varies from scheme to scheme. The Department for Work and Pensions (DWP) considered implementing a price cap for schemes used for automatic enrolment of 0.75% to 1.0%. The Bluesky Pension scheme’s charges are at 0.61% (default investment option) which is at the lower level of the proposed cap. We consider this to be good value for money given the extent of fiduciary oversight of the scheme’s governance. Our fee structure is designed on a sliding scale, based on the length of time to your staging date, and the number of employees you have. Your company can be signed up for as little as £1,950*, after which there is a monthly administration fee per member which covers the ongoing administration of your scheme on your behalf. *dependant on length of time to your staging date and number of employees.
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How do you sign up? We like to keep the sign-up process as straight forward as we can, to make it as easy as possible for you to get your company pension scheme in place.
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Below is what you can expect to experience as part of the sign-up process:
1. We have a conversation with you about your circumstances 2. You submit information about your circumstances to us 3. We provide a free employer report and present our solution 4. You sign up to the scheme 5. We complete 3 months’ payroll testing 6. We support you through implementation and staging 7. We provide on-going monthly assessment and on-going compliance
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Contact us In support of your impending duties, we would be glad to confirm your staging date and to complete a free, personalised risk report detailing future costs and employer obligations. To access your free report and find out more about how the Fairstone Workplace Pension could benefit your business, don’t hesitate to contact us. 1 The Bulrushes Woodstock Way Boldon Business Park Boldon Tyne and Wear NE35 9PF T: 0845 6050 694 F: 0845 6050 681 E: info@fairstoneworkplacepension.co.uk @FairstoneGroup
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www.fairstoneworkplacepension.co.uk | info@fairstoneworkplacepension.co.uk
Useful links The Pensions Regulator’s website also has a series of online tools to help you understand your automatic enrolment obligations. It contains: Staging Date Calculator:
Contribution Calculator:
to find out your staging date
to work out your minimum contribution for each person
Employer Duties:
you’ll need to automatically enrol
an overview of what you’ll have to do by your
Automatic Enrolment Planner:
staging date for everyone who works for you
summarises the main steps towards achieving
How to automatically enrol your staff:
compliance
an explanation of the process you’ll need to follow to
You can find these tools at:
automatically enrol your staff
www.thepensionsregulator.gov.uk/employers/ beginners-guide-to-auto-enrolment
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T H E B L U E S KY PENSION SCHEME