7th August 2015

AE industry liaison manager update - August 2015

Commentary and analysis for 2014 - 2015

Some key highlights from our latest annual update.

• 59% of all employees are now active members of a pension scheme
• 1.8 million employers still to stage - half a million more than previously estimated (more business start-ups and lower numbers of closures)
• Around 55% of employers staging from January 2016 onwards will have eligible jobholders to enrol
• 50% have 1-2 workers

 For the full report www.tpr.gov.uk/docs/automatic-enrolment-commentary-analysis-2015.pdf 

• ·        Tax relief on member’s pension contributions 

There are two different ways of applying tax relief for employee’s pension contributions - and they are often misunderstood or confused. It is very important that whoever is doing the payroll knows what type of tax relief to use (Relief at Source or Net Pay Arrangement) when calculating the member’s contributions. If payroll is not set up correctly, the wrong employee contributions will be taken.

With “Relief at Source” (RAS), the employer reduces the full member contribution by the equivalent of the basic rate of tax (20% at present) and deducts the reduced amount from the employee’s net pay, which is paid over to the pension provider. The pension provider then claims the 20% basic rate tax relief back from HMRC and adds it to the member’s pension pot. Higher rate tax payers will need to claim any additional tax relief due on their pension contributions from HMRC directly via Self Assessment. For example, a worker with pensionable earnings of £1,000 and a 1% contribution would have £8.00 deducted from net pay and paid to the provider who would then claim £2.00 from HMRC, so that a total of £10.00 is paid into their pot.

“Net Pay Arrangement” is when tax relief is applied by payroll (so the employer gives tax relief on the pension contribution as part of the normal payroll process, i.e. the pension contribution reduces the worker’s taxable pay and tax is calculated on the reduced pay accordingly). The full contribution is then paid over to the pension provider. For example, an employee with pensionable earnings of £1,000 and a 1% contribution would have £10.00 deducted from gross pay and £10.00 would be paid to the pension provider.

If, in both of the above examples, the employer’s contribution is also 1%, then another £10.00 would be paid by the employer to make a total of £20.00 paid into their pot.

Most pension providers only support one of these methods – so you should find out which one needs to be used.            

• ·        Compliance and enforcement bulletin March - June 2015

Research shows that 20% of small and micro employers do not know the exact date their duties start. Employers who are not clear about this, risk failing to comply on time and are sometimes unaware they will have to pay the pensions contributions missing because of the delay. The strategy and policy documents explain the circumstances where the regulator will require contributions to be backdated. This includes circumstances where the employer will be required to pay the workers contributions as well as their own. 

• Compliance & Enforcement Quarterly Bulletin
• Compliance & Enforcement Strategy
• Compliance & Enforcement Policy
• Press release: Compliance still the norm but small and micro employers warned of the risks

• ·        Declaration of compliance report July 2012 - end of June 2015 

June 2015 figures were published www.tpr.gov.uk/docs/automatic-enrolment-declaration-of-compliance-monthly-report.pdf.

Headline figures to date are:  

• 50,419 employers have completed their declaration of compliance
• 5,286,000 jobholders have been enrolled into an automatic enrolment pension scheme

• ·        Help your clients to tell us they are not an employer 

If an employer receives a staging date letter from us and they do not believe they are an employer, they should use the link below to tell us, providing one of the following apply:

• it is a sole director company, with no other staff 
• it is a company with more than one director, where no more than one director has an employment contract (and no other workers)
• the company has ceased trading (for partnerships, non-UK companies or individuals who stop employing workers)
• the company has gone into liquidation or has been dissolved (a UK Companies House number must be provided)

X     it is not for employers who have no staff to enrol on their staging date

X     It is not for companies in administration or in non-terminal insolvency 

You will need the PAYE reference and letter code to complete the form.

• https://automation.thepensionsregulator.gov.uk/notanemployer

You need to let us know if circumstances change, as automatic enrolment duties may apply. 

•  Our latest webinar is now available to download - ‘ What’s my role as a business adviser? ’ 

Do you know when you’re allowed to give your clients advice on automatic enrolment and where you cross the line into regulated financial advice?
 
This webinar is for accountants, bookkeepers, payroll professionals and other business advisers. We’ll tell you all about the areas where advisers have told us they want more information, including: 

• Assessing and enrolling staff - who has duties and who is exempt?
• Your role in helping your clients choose a pension scheme - how you can help your clients and what you can and can’t do. 

We’ll also give you hints and tips on some of the steps that may take a little more time, or which you may be less familiar with, such as setting up your clients’ payroll, or sole director companies. This is followed by a Q&A session with our resident experts.

View the webinar and/or download the slides here: www.tpr.gov.uk/press/automatic-enrolment-webinar-whats-my-role-business-adviser.aspx

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