AUTOMATIC ENROLMENT
An easy way to help you save for your retirement
What is auto enrolment?
It is new pension legislation that became effective from 1 October 2012. The government
has introduced the new law to help people save more for their retirement.
The new legislation means every employer, including schools, must enrol all eligible
employees into a qualifying workplace pension scheme if they are not already in one. It is
being introduced gradually and employers are required to repeat this action every 3 years.
However, once you are enrolled, you can subsequently choose to opt-out.
Is the Local Government Pension Scheme (LGPS) a qualifying
scheme?
Yes it is. It has been classed as ‘super compliant’ which means it exceeds the government’s
new standards for qualifying workplace pension schemes.
When does it begin?
To help people save for their retirement the Government requires all employers in the UK to
automatically enrol their workers on a specified Staging Date, into a workplace pension if
their workers meet certain requirements.
Employers have different dates at which they must begin automatic enrolment and the
specified staging date for the London Borough of Hackney is 1st July 2013.
What is the criteria for auto enrolment?
Employees who meet certain criteria and are not already in a pension scheme will be autoenrolled into the LGPS (Local Government Pension Scheme) and contributions will be
deducted from pay.
If you are enrolled this is because you meet the criteria for auto enrolment i.e. you: •
earn over £9,440* a year for 2013/14
(This will apply in each post where multiple employments exist)
•
are aged 22 or over; and
•
are under State Pension age; and
•
are not currently in the pension scheme
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LGPS AE FAQ’s April 2013
In practice, it will make no difference to you if you are already a member of the LGPS. The
majority of employees will already have been contractually enrolled into the scheme
irrespective of their age or earnings.
However, you may be affected by automatic enrolment if you change jobs or take on another
job in the future. Automatic enrolment will impact people in different ways depending on
whether they meet the requirements.
The table below provides a bit more information
How will automatic enrolment impact
you?
What type of worker are
you?
You will be automatically enrolled into
the LGPS on 1 July 2013. You may, if
you wish elect to join the scheme at any
time by contacting either your HR team
or the pension administrators, Equiniti
Paymaster.
An Eligible Jobholder
(EJ) who satisfies all the
requirements.
You will not be automatically enrolled
into the LGPS, but you can still join by
contacting either your HR team or the
pension administrators, Equiniti
Paymaster. If you do not join and you
meet the requirements in the future, you
will be automatically enrolled into the
LGPS when you meet the requirements.
A Non Eligible Jobholder
(NEJ) who is currently not
a member of the LGPS.
You are 22 years or over
but your earnings are
less than £5,668* a year
(or pro rata pay period).
You will not be automatically enrolled
into the LGPS, but you can still join by
contacting either your HR team or the
pension administrators, Equiniti
Paymaster. If you do not join and you
meet the requirements in the future, you
will be automatically enrolled into the
LGPS when you meet the requirements.
An Entitled Worker (EW)
who is currently not a
member of the LGPS.
You do not meet the
requirements above.
You will not be automatically enrolled
into the LGPS, but you can still join by
contacting either your HR team or the
pension administrators, Equiniti
Paymaster. If you do not join and you
meet the requirements in the future, you
will be automatically enrolled into the
LGPS when you meet the requirements.
You earn over £9,440* a
year (or pro-rata pay
period);
Are age 22 or over; and
Are under State Pension
age.
You are 22 years or over
but your earnings are
between £5,668* and
£9,440* a year (or pro
rata pay period).
An Entitled Worker (EW).
* These are the pay limits as at 6th April 2013 for the year 2013-14; they are subject to change each April.
of the pay limits then you should contact your HR or Payroll team.
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LGPS AE FAQ’s April 2013
If you are unsure
So how much will it cost me?
Your contribution rate depends on how much you are paid and it will be between 5.5% and
7.5% of your pay. If you work part time hours your contribution rate is based on the full time
equivalent pay rate for your job. The pay band ranges are reviewed each April in line with the
cost of living.
The pay bands and rates that apply from April 2013 are:
Band
1
2
3
4
5
6
7
Full-time
equivalent pay range
Employee
contribution rate (%)
Up to £13,700
£13,701 to £16,100
£16,101 to £20,800
£20,801 to £34,700
£34,701 to £46,500
£46,501 to £87,100
More than £87,100
5.5
5.8
5.9
6.5
6.8
7.2
7.5
So for a part time worker who works 18 hours and 30 minutes a week all year round, in a role
where the full time annual salary is £18,000, they will pay contributions at 5.9%, the
contributions will be £44.25 per month (based on pay of £750 per month @ 5.9%).
LGPS definition of ‘Pensionable Pay’ is the total of:
• all the salary, wages, fees and other payments paid to an employee for his/her own
use in respect of his/her employment; and
• any other payment or benefit specified in his/her contract of employment as being a
pensionable emolument.
An employee’s pensionable pay does not include:
•
•
payments for non-contractual overtime
any travelling, subsistence or other allowance paid in respect of expenses incurred in
relation to the employment
Why should I be a member of a qualifying workplace pension
scheme and what’s in it for me?
Being in a workplace pension scheme is an important step towards giving yourself the
lifestyle you would like in later life. You may want to start thinking about the things you will
need money for in retirement such as paying bills, transport and buying food, and the things
you may want to do such as:
•
•
•
•
•
Run a car
Meet friends for lunch
Buy gifts for your family and friends
Go on days out or holidays
Take up sport or other leisure activities
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The State pension, currently £110.15 per week for a single person (£5,727.80 per year), is
unlikely to provide you with enough income when you retire, to enable you to do all of those
things.
The good news is that, if you become a member of the LGPS, each time you are paid, both
you and your employer will pay money into the scheme to provide you with benefits when
you retire. If you are a taxpayer, the government would also be contributing to your pension
through tax relief and, if you pay National Insurance (NI), you would pay a lower rate of NI.
So you will not be the only one saving for your future.
A basic rate tax payer paying pension contributions of £100 a month will pay about £20 less
tax and their NI reduces too.
The LGPS offer one of the best ways to plan for retirement with an excellent range of defined
benefits. Unlike some schemes your pension is not affected by share prices and stock
market fluctuations.
From the first day of joining the LGPS, members enjoy a package of
benefits including:
•
•
•
•
•
•
•
a secure pension – payable for life that increases with the cost of living
tax free cash – the option to exchange part of your pension for some tax-free cash at
retirement
voluntary early retirement – from age 60 (even though the scheme’s normal pension
age is currently 65)
serious ill-health cover – if you have to retire due to a serious illness you could receive
immediate benefits based on your period of scheme membership
redundancy cover – with the early payment of pension benefits if you are made
redundant or retired on business efficiency grounds at age 55 or over
life cover – with a lump sum of three times your final pay if you die in service
cover for your family upon your death – including a survivor’s pension for your
husband, wife, civil partner or nominated cohabiting partner as well as children’s
pensions
What happens now, will I receive more information about auto
enrolment?
Yes - You will be written to prior to the staging date of 1st July 2013, informing you of what
type of worker you are in accordance with the table on page 2, and how auto enrolment will
affect you.
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LGPS AE FAQ’s April 2013
What will happen on 1st July 2013?
If you are an existing employee on 1st July 2013, one of the following will apply to you:
a) If you are already a member of the LGPS on 1st July 2013 nothing will change for
you.
b) If you are not a member of the LGPS and meet the age and earnings criteria for
Automatic Enrolment (i.e. your salary is at least £9,440 pa and you are aged
between 22 and state pension age) you will be automatically enrolled into the
LGPS from 1st July 2013.
c) If you are not a member of the LGPS and do not meet the age and earnings criteria
for Automatic Enrolment (i.e. your salary is less than £9,440 p.a. or you are aged
below 22 or above state pension age), nothing will change for you although you
always have the right to opt in at any time if you are age between 16 and 74.
However, should you meet the eligibility criteria in the future you will be
automatically enrolled into the LGPS and a monthly contribution will be deducted
from your salary. You have the right to opt out again if you choose to do so and will
receive a refund of contributions if you opt out within 3 months.
I have already opted out of the pension scheme, so why does
this affect me?
Although you may have already opted out, you will be auto enrolled back into the scheme
from 1st July 2013 as long as you meet the above criteria.
Can someone refuse to be auto-enrolled?
No. All eligible employees have to be auto-enrolled. They have 1 month after being autoenrolled, when they can opt out of the pension scheme if they wish.
Why should I join because I am “too old” to benefit?
Whatever contributions you put into your pension, you will always get back more than you put
in thanks to the employer’s contribution and tax relief. In addition, from the moment you join
you will benefit from:
•
Life cover with a lump sum of three times your final pay if you die in service
•
Cover for your family upon your death, including a survivor’s pension for your
husband, wife, civil partner or nominated co-habiting partners as well as children’s
pensions.
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LGPS AE FAQ’s April 2013
I’m already paying into a personal/private pension, what should I
do?
It’s possible to have both a workplace pension and your own personal pension, so you could
choose to continue paying into both, or you might choose to continue with just one of them.
It will depend on your circumstances – for example, what you can afford and what your
personal pension and workplace pension schemes are offering you.
With your workplace pension, you will receive a contribution from your employer that you
won’t be getting with your personal pension.
But pensions aren’t safe….the value of them can go down as
well as up, like the stock market?
The LGPS is a statutory funded pension scheme and it is a secure pension arrangement with
rules set out in legislation made under an Act of Parliament (the Superannuation Act 1972).
It is a defined benefit scheme, this means the benefits are defined in the scheme rules and
build up independently of the contributions payable and investment returns.
The benefits you receive are related to your earnings when leaving the scheme or retiring,
and the length of pensionable service, i.e. how long you have been paying into the scheme.
Both employees and employers contribute to the LGPS: employees' contributions are fixed,
while employers' contributions vary depending on how much is needed to ensure benefits
under the Scheme are properly funded.
The Fund Actuary sets each employer's contribution rate as part of the actuarial valuation of
each fund's assets and liabilities, which takes place every three years.
Why should I join because I only work part time?
The LGPS allows you to save while you are working in order to enjoy benefits once you
retire. It also offers valuable life cover and family benefits in the event of your death, and
cover in the event of your early retirement on the grounds of permanent ill-health,
redundancy or business efficiency. If these things are of value to you, it’s worth considering
paying in.
As a part-timer you receive less pay than an equivalent full-timer and pay less into the LGPS
so your benefits build up at a proportionate rate to those of a full-time employee.
Part time membership and pay are converted to their full-time equivalent to calculate LGPS
retirement benefits.
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LGPS AE FAQ’s April 2013
Why should I join because I don’t expect to be working for
Hackney or local government for the rest of my career?
Many people move jobs frequently. If you do, then you need to consider how best to save for
your retirement. The LGPS allows you to save while you’re working, so that you can enjoy
benefits once you’ve retired. You also have valuable life cover and family benefits if you
were to die while a member.
As an LGPS member, you won’t risk losing past contributions if you move on: on leaving your
job, you can choose whether to transfer your pension rights to your new pension provider.
Alternatively, if you have at least 3 months membership when you leave, or you have
transferred other pension rights into the LGPS or you already have a deferred benefit in the
LGPS in England or Wales, you can leave your benefits deferred in the scheme until
payment at a later date. Their value will increase every year with the cost of living.
How do I know if I've been auto-enrolled into the pension scheme?
You will need to check your payslip to see if deductions are being made. However, you will
have been auto-enrolled into the scheme as previoulsy notified, if you are currently not a
member of the LGPS, aged 22 or over and under State Pension Age and because you earn
more than £9,440 a year.
Can I opt out of the pension scheme?
If you are automatically enrolled, you can choose to leave the LGPS by completing an opt out
form, which you can only obtain from the pension administrators, Equiniti Paymaster, not
from your employer.
Opting out of the LGPS is a big decision as you will be giving up a guaranteed income for
when you retire as well as other benefits such as valuable life cover while you are working.
To help you save, your contributions are paid from your gross pay, before the deduction of
income tax, so the net cost of your contributions is usually reduced by 20% or more, if you
pay at the higher tax rate, also your employer contributes to the LGPS too.
Therefore, opting out won’t save you as much in take home pay as you may think. In most
cases, you will pay more tax and National Insurance if you opt out of the LGPS. A basic rate
tax payer paying pension contributions of £100 a month will pay £20 more tax and their NI
contributions will increase.
Depending on your age, retirement may seem ‘a life time’ away, but remember you may well
need a significant pension when you retire to fund life style choices such as travel, holidays,
hobbies etc. and it is unlikely that your state pension will provide enough income to meet the
lifestyle you aspire to. Whatever your reasons for considering opting out of the scheme, we
ask that you give this matter careful consideration before making a final decision.
If you choose to opt out you will also be giving up extra savings that we and the Government
provide to help you save. If you are thinking about opting out we suggest that you speak to
an Independent Financial Adviser (IFA) before making a decision. You can find an IFA by
visiting www.unbiased.co.uk.
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LGPS AE FAQ’s April 2013
Where can I get an Opt-out form?
Should you still decide to opt out, you can only obtain an Opt-out form from the pension
administrators, Equiniti Paymaster, not your employer. You can download a form from their
website: http://hackney.xpmemberservices.com/Home.aspx or phone 01293 603 085 and
they will send you an opt-out form.
Please note that you cannot opt out before you have been enrolled, so the opt-out
form must only be completed on or after 1st July 2013 and then sent to your HR/Payroll
team for processing.
Can I opt out of the scheme at any time?
Yes – Providing this is done on or after 1st July 2013. The regulations stipulate that you
can't opt out until you've been enrolled so if you were auto-enrolled on 1st July 2013 then you
can't opt out until 1st July 2013.
If you opt out within 3 months of being enrolled into LGPS you will still receive a full refund
of your contributions provided you don’t have other LGPS benefits.
However, if you opt-out of the LGPS after 3 months, you will not be able to have a refund of
your contributions. The pension scheme will defer (freeze) your benefits to be paid when you
retire.
If I opt out, can change my mind and opt back in?
Yes, at any time. Please note that your employer must automatically re-enrol you every 3
years on the anniversary of the staging date (unless you have opted out within 12 months of
any re-enrolment date).
What happens if I turn 22 years of age after the end of July?
As long as you meet the rest of the criteria, you will be automatically enrolled into the pension
scheme during the month you reach your 22nd birthday if you had previously opted out of the
pension scheme.
What do I do if I believe I do not earn more than £9,440 per
year?
You need to check your latest payslip that is available to work out your pay. This is your
gross pay, minus paid expenses and salary sacrifice deductions. Each post should be
calculated separately.
If, after checking your payslip, you still feel that you earn less than £9,440 p.a. please contact
your HR/Payroll team who will investigate this further for you.
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LGPS AE FAQ’s April 2013
What happens if I am over 22 years old and below State Pension
Age and have not been auto-enrolled?
You do not meet the criteria set by the government to be automatially enrolled into the
pension scheme but you can still join by contacting either your HR team or the pension
administrators, Equiniti Paymaster. If you do not join and you meet the requirements in the
future, you will be automatically enrolled into the LGPS when you do meet the requirements.
What happens if I am below 22 years of age / over state pension
age?
You do not meet the criteria set by the government to be automatially enrolled into the
pension scheme but you can still join by contacting either your HR team or the pension
administrators, Equiniti Paymaster. If you do not join and you meet the requirements in the
future, you will be automatically enrolled into the LGPS when you meet the requirements.
What happens if I am a casual worker?
The Council has decided to operate the auto-enrolment postponement rule in respect of
casual workers. This means that if you meet the criteria we will defer automatically enrolling
you into the LGPS for a period of 3 months. If you still meet the criteria after 3 months we will
automatically enroll you then.
What happens if I have 2 jobs one with LGPS and one with
Teachers Pensions?
You will be automatically enrolled into the appropriate pension for any job where you meet
the criteria. This could result in you being automatically enrolled twice or even three times
(one enrolment per employment contract held).
I am a new starter in July 2013, how will this affect me?
Under the Scheme rules you will automatically join the Scheme whether or not you meet the
auto-enrolment criteria. This is because all employees are contractually eligible to be in the
Pension Scheme (with the exception of casual workers who have to elect to join if they want
to be in the LGPS).
What happens to my pension if I leave the London Borough of
Hackney?
Your pension will either be deferred (frozen) and a pension will be paid to you when you
retire or you can transfer your pension to your new employer.
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LGPS AE FAQ’s April 2013
What if my hours or salary drops?
It doesn’t matter - once you are auto-enrolled you will stay in the pension scheme unless you
choose to opt-out.
I work in a school how does this affect me?
Auto enrolment still affects you and you will be enrolled into the LGPS (or TPS if you are a
teacher) if you are not already in a scheme.
I am working in an Academy, when will I be auto-enrolled?
The Academy should have been given its own date for auto-enrolment so you will need to
check with your Headteacher or HR team when you can expect auto enrolment to start at
your Academy.
I work in a foundation, voluntary aided or foundation special
school how does this affect me?
You will be auto-enrolled into the LGPS (or TPS if you are a teacher) on 1st July 2013 if you
meet the criteria.
I work in a maintained school how does this affect me?
(maintained community, voluntary controlled, community special or maintained
nursery schools)
You will be auto-enrolled on 1st July 2013 into the LGPS (or TPS if you are a teacher) if you
meet the auto enrolment criteria.
I work in a school Club/Group, how will this affect me?
Your employer will need to make arrangements to enrol you into a qualifying pension scheme
if you meet the criteria. You are not able to join the LGPS or TPS so your employer will need
to make other arrangements. You should talk to your employer to ask them what
arrangement they have made for you.
Why haven't you enrolled me into NEST instead, surely it's
cheaper?
The Council already operates both the LGPS and TPS. The LGPS and TPS exceed the
governments standard for a qualifying pension scheme under the automatic enrolment
regulations. This means that the Council schemes are better than the National Employment
Savings Trust (NEST) which the government has set up as a minimum to help employers,
who don’t already have a pension scheme, deal with auto-enrolment.
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LGPS AE FAQ’s April 2013
But I work at more than one school / But I have more than one
job (multiple employments)?
The opt out/in provisions are such that a scheme member can opt out or in for each
employment. A person in multiple employment can be in the LGPS for one employment and
out for another.
That means that if you decide to opt out of the scheme you will be required to complete an
opt out form for each employment, unless it has been determined that a single employment
relationship exists (i.e. the contracts are not separate or distinct).
What happens if I have 2 or more jobs which qualify for the
same pension scheme?
If you meet the criteria you will be automatically enrolled into the pension scheme in both
posts, assuming you meet the criteria in both posts.
I am employed on a fixed term contract, how am I affected by
auto enrolment?
If your fixed term contract is for a period of 3 months or more you will be auto enrolled if you
are not already a member of a pension scheme and meet the criteria set out below:
•
Earn over £9,440 a year (annualised earnings in any ONE post);
•
Are aged 22 or over and are under State Pension age; and
•
Are not currently in a pension scheme.
If your contract is for less than 3 months then auto enrolment will be postponed. However, if
your contract is extended beyond three months and you meet the criteria above you will then
be auto enrolled.
Despite the above, if you are on a fixed term or a casual worker and you wish to join the
LGPS, you may do so at any time by going to your HR/Payroll team or contacting the
pension scheme administrators:http://hackney.xpmemberservices.com/Home.aspx
or phone 01293 603 085
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LGPS AE FAQ’s April 2013
The following websites also provide further details on Auto
Enrolment A more comprehensive guide to auto enrolment can be found on The Pensions
Regulator website at http://www.thepensionsregulator.gov.uk/individuals.aspx
To find out more about the LGPS visit - www.lgps.org.uk
Directgov – www.direct.gov.uk
Department for Work & Pensions – www.dwp.gov.uk
Independent Financial Adviser (IFA) - you can find an IFA by visiting www.unbiased.co.uk o
Department
Please note, these FAQ’s are only a guide and do not cover every circumstance. The
information contained in the document is correct as of April 2013.
If you have a specific query, please contact either your HR team direct or the pension
administrators, Equiniti Paymaster on their AE helpline number:
01293 604 781 or 01293 604 055
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LGPS AE FAQ’s April 2013