General lack of public awareness and worry expressed over the take up of the Government’s auto-enrolment workplace pension scheme during the past year may have been somewhat exaggerated.
However, with even the Pensions Minister Steve Webb himself expressing concerns that employee take up could be as low as 35% it would have been no surprise if early results indicated that the scheme was failing to gain traction, inspire confidence…or worse still, was even bombing.
Today I want to highlight important pension changes, especially if you have been seeking to shield yourself from paying income tax on your annual pension contributions via registered family member schemes.
Recently the Government reduced the annual pension contributions allowance significantly. HMRC cut the allowance down from £255,000 to £50,000 for 2011-2012.From 2014-2015 this will drop even further to £40,000. It does not matter whether the contributions are being made by an individual or employer, these new allowance restrictions apply.
Today’s article is an important update on Pension Transfers and talks about what you can and can’t do now if you wish to “unlock” your pension, or use Qrops if you are an expat.
A newly formed HMRC anti-fraud, tax avoidance squad gives our topic spice too.
Due to the prevalence of schemes to unlock pensions for those under the age of 55, HMRC have formed the avoidance and counter fraud group, who are tasked with effectively putting an end to this practice.
With recent revelations by SIPP and insurance providers, that they will be refusing pension transfer money to these “schemes,” the government have moved to actively shut down any attempts to remove funds before age 55.
Last week I wrote an article about the new Flat Rate Pensions. After I had done it I thought some may find it helpful to grab the essentials about it on an easy view slide show.
So here is my new Flat Rate Pensions Slide Show. Hope you like it!
Cometh the New Year, cometh a new pension plan by the Government.
I am getting quite a few folks asking me whether they are good, bad or… dare I say it, even ugly?
Well let’s see shall we…
Depending on one’s age, all three could apply. The new single-tier plan, as outlined in the government’s current White Paper, will affect all ages of the population differently.
As time rolls on and the date for the beginning of the possibly the biggest ever changes to our pensions system, I thought it was a good time to speak out to all you employers and employees out there who will be effected by this.
Make no mistake about it, employers are going to face additional cost and administration burdens under this new pension regime. However, the good news is that there is time to plan and prepare, but time is running out.
There are four basic steps that can help employers plan.
1. Find out when the staging date is
This will give employers a deadline for implementation and a point to work back from. The staging date will be based on how many workers an employer has or, if there are less than 50 workers, the last two characters of the employer’s ‘Pay As You Earn’ reference.
There are more than 40 staging dates spread over four years from 2012. Larger employers will go first, smaller employers last.
You can find out your corporate client’s staging date by using this handy staging date calculator from Scottish Life.
2. Find out the duties that are likely to apply
Every employer will have some duties to perform but the duties will be different depending on the types of worker they employ. As a rule of thumb, any worker over age 22 and under state pension age, and who earns more than around £7,500 a year, will be treated as an ‘eligible jobholder’.
These workers will need to be automatically enrolled into a pension scheme by their employer. As long as these workers stay in the pension scheme, the employer will have to pay contributions. Those workers who don’t fall within this category will still have to be offered a pension scheme by the employer, and in some cases the employer will have to pay into it.
3. Review pension provision
Employers who already offer some form of pension provision will need to make sure that their existing scheme meets a minimum standard. This generally means that there must be a minimum contribution rate, made up of both employer and employee contributions.
If the scheme isn’t up to scratch contributions will have to increase. Building up these contributions to the minimum standard slowly could be preferable to employers rather than waiting until the last minute and facing a high up-front bill.
Employers who don’t have a pension scheme will have to set one up sooner or later. Again, starting to do this as early as possible would help employers to build the scheme up at their own pace.
4. Consider the impact on the business
There is no doubt that automatic enrolment will have cost implications for every employer, large or small. Employers will need to consider how they will meet these costs.
Can they simply absorb the costs, potentially reducing profits?
Will the costs of their goods or services need to increase?
Will staff remuneration structures have to change?
Will HR processes and systems need to change?
Will business plans need to be adjusted to reflect the increase in costs?
These are just some of the questions that finance directors and business owners will need to address. Planning ahead, well before the staging date, could help smooth any cost increases, avoiding last minute shocks.
It’s clear that employers will face a major challenge when their employer duties start. With the economic climate as it is, it is probably even more important to plan as early as possible. It won’t be easy but help is out there. If you wish to have a free initial consultation with us please just get in touch and we’ll be more than happy to have a chat about your situation.
NOTE: I have been writing articles here since 2007 so please take note the date of the article, because obviously, things like laws or tax allowances etc may have changed since then.
I do try my best to keep up to date, but I'm only an humble advisor and there are hundreds of my financial articles here! Please call or email if you need to double check something. I'll gladly help.
"I have introduced many clients of mine to Billy as I have complete trust in his professional ability." Tom Queen, Solicitor - Thomas Queen & Co. Dunfermline, Fife.
"I've found Billy a personable yet professional practitioner who offers sound advice and realistic proposals backed up by facts. I'd wholeheartedly recommend Billy." Rory Paterson, Director - Mediacom Scotland Ltd
Hi everyone, on a small rant today!
