Pantheon Financial Management LtdPantheon Financial Management Ltd
Making a Success ofMaking a Success ofPensions ReformPensions ReformChris Rose and Mark DowdeChris Rose and Mark Dowde
May 2012May 2012
Pantheon Financial Management LtdPantheon Financial Management Ltdwww.pantheonfinancial.co.uk
Independent Financial AdvisersIndependent Financial Advisers
Corporate Services Corporate Services Business Strategies; Business ProtectionBusiness Strategies; Business Protection Employee BenefitsEmployee Benefits
Group CommunicationsGroup Communications Share Schemes; Redundancy ProgrammesShare Schemes; Redundancy Programmes Retirement CounsellingRetirement Counselling
Private Client ServicesPrivate Client Services Retirement Planning; Investment PlanningRetirement Planning; Investment Planning Tax & Trust Planning Tax & Trust Planning
Pantheon Financial Management LtdPantheon Financial Management Ltdwww.pantheonfinancial.co.uk
Independent Financial AdvisersIndependent Financial Advisers
The material provided by this presentation is for The material provided by this presentation is for general information only and does not constitute general information only and does not constitute investment, tax, legal of other forms of financial investment, tax, legal of other forms of financial advice.advice.
OVERVIEWOVERVIEWWhy reform workplace pensions?Why reform workplace pensions?
Changes to workplace pensionsChanges to workplace pensions
The National Employment Savings Trust (NEST)The National Employment Savings Trust (NEST)
NESTNEST
(NATIONAL EMPLOYMENT SAVINGS TRUST)(NATIONAL EMPLOYMENT SAVINGS TRUST)
10-11m people will be auto enrolled10-11m people will be auto enrolled
In 1901 there were 10 workers for every In 1901 there were 10 workers for every pensioner, now there are 4 workers for every pensioner, now there are 4 workers for every pensioner and by 2050 this is expected to be 2 pensioner and by 2050 this is expected to be 2 workers for every pensioner workers for every pensioner
(Source: DWP Report May 2011)(Source: DWP Report May 2011)
Why Reform Workplace Pensions?Why Reform Workplace Pensions?
The Pension CommissionThe Pension Commission
2003-2005 Pension Commission reviewed the 2003-2005 Pension Commission reviewed the UK pensions system and made UK pensions system and made recommendationsrecommendations
Pension Commission found that:Pension Commission found that:
-- Up to 12 million people were not saving Up to 12 million people were not saving enough for retirementenough for retirement
-- Longevity – simply put, people are living Longevity – simply put, people are living longer in retirement.longer in retirement.
The Pension Commission -The Pension Commission -LongevityLongevity
The Pension CommissionThe Pension Commission
State Pension could not meet this State Pension could not meet this challengechallenge
Spending on State Benefits for pensionersSpending on State Benefits for pensioners
- 2006/2007 - £84.6 billion- 2006/2007 - £84.6 billion
- 2035/2036 - £189.1 billion*- 2035/2036 - £189.1 billion*
Taking no action would lead to an Taking no action would lead to an unaffordable burden on taxpayersunaffordable burden on taxpayers
*Projected –source: Pensions Policy Institute Key Facts / Scottish Life April *Projected –source: Pensions Policy Institute Key Facts / Scottish Life April 20122012
The Pension Commission The Pension Commission RecommendationsRecommendations
Fairer, more generous State Pension coverageFairer, more generous State Pension coverage
(flat rate £140 / week (no set date currently in (flat rate £140 / week (no set date currently in place))place))
System of automatic enrolment into pension System of automatic enrolment into pension savingsaving
Minimum employer contribution to workers’ Minimum employer contribution to workers’ pensionspensions
New, national pension scheme designed to New, national pension scheme designed to provide a simple and low cost way of saving for provide a simple and low cost way of saving for low-to-moderate earnerslow-to-moderate earners
Changes to Workplace PensionsChanges to Workplace Pensions
Who Does What?Who Does What?
DEPARTMENT FOR WORK & PENSIONS (DWP)DEPARTMENT FOR WORK & PENSIONS (DWP)
Scope of automatic enrolmentScope of automatic enrolment
Staging and phasing timetableStaging and phasing timetable
THE PENSIONS REGULATORTHE PENSIONS REGULATOR
Monitor and regulate the employer duties. Monitor and regulate the employer duties.
NEST (NATIONAL EMPLOYMENT SAVINGS NEST (NATIONAL EMPLOYMENT SAVINGS TRUST)TRUST)
A new, trust-based pension scheme for low to A new, trust-based pension scheme for low to moderate earnersmoderate earners
Public service obligation to accept all employersPublic service obligation to accept all employers
2012 Reforms: What’s Changing?2012 Reforms: What’s Changing?
Employers have to offer a contribution to Employers have to offer a contribution to certain employeescertain employees
No action will result in a qualifying No action will result in a qualifying employee automatically saving through a employee automatically saving through a workplace pension.workplace pension.
This is as a result of Automatic enrolmentThis is as a result of Automatic enrolment
Objective:Objective:
Saving is the normSaving is the norm
2012-20162012-2016
Impact on Employers Impact on Employers (Pensions Act 2008 and 2010 Review(Pensions Act 2008 and 2010 Review))
Automatic enrolment of “eligible jobholders”Automatic enrolment of “eligible jobholders”
From age 22 up to State Pension AgeFrom age 22 up to State Pension Age
Those earning more than the tax thresholdThose earning more than the tax threshold
““staged” in from Oct 2012, depending on staged” in from Oct 2012, depending on employee numbersemployee numbers
3 month waiting period, plus flexibility to bring 3 month waiting period, plus flexibility to bring forwardforward
Re-enrolment required every 3 years, new Re-enrolment required every 3 years, new post review flexibilitypost review flexibility
Individuals can choose to opt out but Individuals can choose to opt out but employer cannotemployer cannot
Impact on Employers Impact on Employers (Pensions Act 2008 and 2010 Review(Pensions Act 2008 and 2010 Review))
Minimum Employer Contributions – Employers have to pay in at least Minimum Employer Contributions – Employers have to pay in at least part of a minimum contribution with individuals and HMRC contributing part of a minimum contribution with individuals and HMRC contributing the restthe rest
Contributions based on earnings band £5,564 and £42,475 in 2012/13 Contributions based on earnings band £5,564 and £42,475 in 2012/13 tax year (Based on Draft Regulation source: tax year (Based on Draft Regulation source: - : “The Automatic Enrolment (Earnings Trigger and Qualifying Earnings Band) Order 2012”
3% of “band earnings” minimum employer contribution + tax relief + 3% of “band earnings” minimum employer contribution + tax relief + employee contribution = total 8% minimum contributionemployee contribution = total 8% minimum contribution
Total minimum contribution payable from October 2018Total minimum contribution payable from October 2018
Example – earnings £30,000 – E’er £62.41 & E’ee £104.02 gross per Example – earnings £30,000 – E’er £62.41 & E’ee £104.02 gross per month (source: The Pension Regulator May 2012)month (source: The Pension Regulator May 2012)
Minimum contribution levelsMinimum contribution levels
4%Employee
3%Employer
1%Tax relief
The total minimum The total minimum contribution to a employees contribution to a employees retirement pot will be 8% of retirement pot will be 8% of the qualifying earningsthe qualifying earnings
Of this 8%, the employer will Of this 8%, the employer will have to contribute a minimum have to contribute a minimum of 3%of 3%
The rest will be made up of tax The rest will be made up of tax relief and the employee’s relief and the employee’s contributioncontribution
DWP: Planned StagesDWP: Planned Stages
Large EmployersLarge Employers
Medium EmployersMedium Employers
Small / Micro EmployersSmall / Micro Employers
New PAYEsNew PAYEs
Staging dates 01/10/2012 through to 01/02/2018Staging dates 01/10/2012 through to 01/02/2018(Source: Pension Regulator Website May 2012)(Source: Pension Regulator Website May 2012)
The Administrator of NESTThe Administrator of NEST
Tata Consultancy ServicesTata Consultancy ServicesIT services, business solutions and outsourcingIT services, business solutions and outsourcing
International – 137 offices in 42 countries –International – 137 offices in 42 countries –
88 delivery centres in 18 countries88 delivery centres in 18 countries
160,000 employees globally160,000 employees globally
More than 60 sites in the UKMore than 60 sites in the UK
Tata and Diligenta (UK Operation) – experienced Tata and Diligenta (UK Operation) – experienced partnerspartners
Diligenta is a UK based, FSA regulated subsidiary of Tata Consultancy Diligenta is a UK based, FSA regulated subsidiary of Tata Consultancy Services – the world’s leading IT consulting, services and business Services – the world’s leading IT consulting, services and business outsourcing (BPO) organisations.outsourcing (BPO) organisations.
Diligenta manage and support Life & Pensions operationsDiligenta manage and support Life & Pensions operations
33rdrd Party Administrators – More than 30 years experience in UK insurance Party Administrators – More than 30 years experience in UK insurance sector with 90 insurance clients including the top 7 UK insurers (including sector with 90 insurance clients including the top 7 UK insurers (including AXA Group, Phoenix Group, L&G, Skandia)AXA Group, Phoenix Group, L&G, Skandia)
NEST Investment OptionsNEST Investment Options
NEST NEST Retirement FundRetirement Fund
NEST Higher Risk FundNEST Higher Risk Fund
NEST Pre-retirement FundNEST Pre-retirement Fund
NEST Ethical FundNEST Ethical Fund
NEST Sharia Fund NEST Sharia Fund
NEST Lower Growth FundNEST Lower Growth Fund
NEST NEST Corporate Bond FundCorporate Bond Fund
Charges – How will NEST compare?Charges – How will NEST compare?
NESTNEST - - 1.8% Contribution Charge; 0.3% Annual 1.8% Contribution Charge; 0.3% Annual Management Charge (AMC)Management Charge (AMC)
Contribution charge deducted until set cost met. Contribution charge deducted until set cost met. Gross contribution of £100 will result in £98.20 Gross contribution of £100 will result in £98.20 investment.investment.
Calculated by NEST to average out at a 0.5% Calculated by NEST to average out at a 0.5% AMC but dependent on term to retirement. AMC but dependent on term to retirement. Combination of Contribution Charge and Combination of Contribution Charge and AMC.AMC.
2012 – Employer Options2012 – Employer Options
Choices for employees
Existing DB and DC
schemes
New DC automatic enrolment schemes
Existing/NewExisting DB
and DC schemes
NEST
+
Sole schemeAssociate, entry level or base scheme
How NEST can be usedHow NEST can be used
Sole schemeSole schemeOffered to all employeesOffered to all employees
Associate schemeAssociate schemeFor a category of employee to sit alongside existing scheme For a category of employee to sit alongside existing scheme e.g. the low paide.g. the low paid
Entry level schemeEntry level schemeWhere your existing scheme has a waiting periodWhere your existing scheme has a waiting period
Base schemeBase schemeTo which minimum contributions are made for all To which minimum contributions are made for all employees, with another scheme on topemployees, with another scheme on top
Any Questions?Any Questions?
This information is based on our understanding of current taxation law and Her Majesty’s Revenue and Customs practice,
which may change in the future.
Price of units can fall as well as rise. Past performance is not a guide on which to base future returns.
Pantheon Financial Ltd group of companies incorporating Pantheon Financial Management Ltd and Pantheon Financial Investments Ltd. Henton & Co. Financial Services is a trading style of Pantheon Financial Management Ltd. Pantheon Financial Ltd has no connection with Pantheon Ventures Ltd or its affiliated companies or with any funds managed or
advised by Pantheon Ventures Ltd or its affiliated companies, including Pantheon Participations PLC.
[email protected] www.pantheonfinancial.co.uk
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