Workplace pensions – Automatic enrolment!

‘The law on workplace pensions has changed. Under the Pensions Act 2008, every employer in the UK has a duty to put certain staff into a pension scheme and contribute towards it. This is called 'Automatic Enrolment'.

You may be a hairdresser, an architect or employ a personal care assistant, but if you employ at least one person you are an employer and you have certain legal duties.

The chart below shows that nearly half a million small businesses will need to arrange their pension scheme this year!

The Pension Regulator has issued 6,746 compliance, unpaid contributions notices and fines to date and 3,732 in the period October to December 2015!  Don’t be one of them - fines start at £400 and can be £50 daily for non- compliance!

So small business owners need to:

• establish a qualifying work place pension scheme,
• ensure the scheme has an appropriate default fund,
• issue statutory communications to all employees and
• enrol all eligible jobholders into the scheme.

Do you have the time to do all this and run your business?

Ask yourself “How do I choose the right pension scheme, is my payroll Auto Enrolment compliant, how are you going to tell your pension scheme what to collect and where to allocate contributions?”  If you’ve not done anything about preparing for Automatic Enrolment, talk to us; we can help you with our fully compliant payroll, workforce assessment and pension selection processes and help you avoid the wrath of the Regulator and get on with what matters most - Making your business a success!”

Will pension tax relief change again on budget day?

There has been a lot of speculation that the Chancellor may announce further major changes to tax relief on pension contributions in his March Budget, based on consultations with the pensions industry.  Under the current rules an individual’s contributions can save them tax at their highest marginal rate and also help them avoid losing their personal allowance (see above). So a £8,000 pension contribution by a higher rate taxpayer results in £2,000 (20%) being added to their fund by HMRC = £10,000 gross. The £10,000 gross contribution would then save a further £2,000 in tax, so the net cost would be just £6,000 if they are a higher rate tax payer.

It is understood that the Government is considering introducing a flat rate of pension tax relief of between 25% and 33%, which would be good news for basic rate taxpayers, but higher rate taxpayers would lose out. If say a 30% rate of relief was to be introduced, a £7,000 contribution would be topped up to £10,000 with no further relief.  It has also been suggested that it may not be possible in future to agree with your employer to sacrifice part of your salary in exchange for an additional tax free employer pension contribution. The starting date of these possible changes is uncertain but they may be effective from Budget Day!

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