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Spring Charities Newsletter Pensions James Keith, a Senior Associate in our Pensions Group has been advising various charity and third sector clients on the risks and threats associated with their pension schemes and new obligations under auto-enrolment. In the last quarter he spoke at the SCVO Gathering at the SECC, our own Charities Briefing and has just submitted the below blog on “Pensions and Charities: Plan and Budget Now for Auto-Enrolment” to Third Force News - so it is hot off the press! Pensions and Charities: Plan and Budget Now for Auto-Enrolment Auto-enrolment affects all charities with employees or workers. If your charity has more than 30 employees, you’ve probably already reached your ‘Staging Date’, are providing a workplace pension for your employees and are required to make minimum contributions. If so, have you budgeted for the future and managed risk? Not reached your Staging Date yet? If your charity has a PAYE reference number in issue before April 2012, your last possible Staging Date is April 2017 – but it could be much sooner. If The Pensions Regulator has not sent your Staging Date to you, enter your PAYE reference here to check it as a matter of urgency. If you have your Staging Date, budget as soon as possible! Charities should prepare and plan as quickly as possible - budgets are tight, grant funding applications have to be submitted, existing contracts may have to be reviewed and pay rises may Alternatively, if you operate a fairly generous group personal pension plan with a surprisingly low membership rate, stress test the scenario of every employee being enrolled, based on their current contractual entitlement: could your charity afford this? If the answer is no, the charity will need to factor in enough time to be able to legally consult with affected employees so they would be auto-enrolled at a lesser or ‘default’ contribution rate of 1%, 2% and 3% of qualifying earnings (as phased in). need to be taken into account. The Regulator’s ‘understanding your costs’ guide is a good starting point. Helpfully, the Chancellor announced a delay in the increase in the minimum employer contribution rate to 3% of ‘qualifying earnings’ until April 2019. If, for example, the charity is undertaking work which is outsourced from a Local Authority or other public body, have you stress-tested your budget to take into account the future increases in minimum auto-enrolment contributions? Is there a ‘change in law’ provision which can help? Managing Risk You may be a small charity with a couple of employees in a defined benefit (DB) scheme, such as The Pensions Trust or the LGPS. On a daily basis I advise many charities of the risks associated with these schemes. The common theme is that charities, if they can avoid it, do not want their liabilities to increase. Ordinarily charities would look to autoenrol any existing employees into a ‘defined contribution’ or ‘money purchase scheme’ which has less risk attached to it, rather than inadvertently enrolling their employees into the DB scheme. Don’t assume that you will continue to have a high opt-out rate from your workforce. The DWP’s auto-enrolment valuation report in 2015 confirmed that the overall employee opt-out rate was 10%, which means that 90% have stayed in their pension scheme once enrolled. Fines for non-compliance While compliance has been pretty good to date, with the Regulator imposing relatively few fines and compliance notices, the Regulator’s enforcement activity is increasing. In its own words, “We expect to see a rise in the number of times we need to use our powers so our message to employers remains clear: start getting your plans in place early or you risk being fined”. Choosing a scheme Helpfully, the Regulator’s website now includes information to help employers find a pension provider including a list of ‘master trust’ pension schemes open to employers and charities of all sizes. Planning! Get advice and work on a project plan: pension consultants, financial advisers, accountants, payroll providers and even lawyers can help you. Key Contact: James Keith Senior Associate 0141 303 1329 james.keith@macroberts.com 5 www.macroberts.com