Category: All

Auto enrolment: the heavy price for failing to comply

30th July 2015

Running a small business isn’t easy: there’s always a lot to do and not enough hours in the day in which to do it, so perhaps it’s not surprising some SMEs are falling into the trap of neglecting their workplace pension obligations.

But those who overlook their auto enrolment duties do so at their peril, facing large fines for failure to comply. It’s an issue that could potentially threaten the survival of a small business, and in order to highlight its importance The Department of Work and Pensions has launched an advertising campaign to the 1.3 million small and micro firms that are yet to enrol their staff to make them aware of their duties.

The Pensions Regulator (the body responsible for UK regulating workplace pensions) takes auto enrolment obligations extremely seriously, and has this year for the first time issued escalating penalty notices to businesses for failure to comply.

Escalating payment notices are fines issued to employers who persistently fail to comply with their auto enrolment duties, and consist of fines of between £50 and £10,000 per day, depending on the size of your workforce.

Four companies were issued with these fines in the first quarter of 2015. To have reached this stage, they will already have received informal guidance and warnings, statutory notices and fixed penalty notices of £400 from the Pensions Regulator.

The latest figures from the Regulator also show that the number of fixed penalty notices issued is rising by 20% every quarter, and that in the first quarter of this year alone the regulator had to exercise its powers 446 times.

So why are so many employers failing to comply, when they know the obligations of auto enrolment? Research by the Pensions Regulator suggests the problem is that too many small businesses are leaving preparations until the last minute, don’t understand what it is they need to do, or, worse still – are ignoring it completely.

The issuing of escalating penalty notices shows the Pensions Regulator can and will act to tackle non-compliant employers, and that auto enrolment isn’t something that can just be ignored.

Seeking expert help and advice can help you stay on track with your obligations as an employer and ensure you stay compliant.

The Pension Regulator’s recent stance shows non-compliance will come at a high price to employers, so make sure auto enrolment is the number one item on your to do list.


All content is for general guidance only. It provides an outline, and may not include points which are important in your case. You should not rely on this blog without taking individual advice based on the full facts of your case. The information given was correct at the time of publication.


 

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Pension freedom – not as “free” as you think

14th July 2015

The new pensions freedom of choice has given people far greater power over how they spend, save or invest their retirement funds in future. This has led to many questions and misconceptions arising.

Whilst you should be able to draw the full value of your pension fund as a lump sum (but beware of the income tax pitfalls), you may not be able to do so in stages via what is known as drawdown. This is because many older pension plans are set up on old IT systems and they simply do not have the capability to facilitate stage payments.  Although these changes have been brought in due to new legislation, it does not force pension companies to pay funds from existing plans in this way. You may therefore be required to transfer to a new plan that will facilitate all of the new pension freedoms.

Whichever route you take you should take advice. The Government has promised that everyone will have access to free “guidance” via the Pension Wise service to help you understand what your choices are. However, it is important to be aware that this service will provide only general guidance and not personal advice. You should therefore seek personal financial advice from a regulated independent financial adviser. You will have to pay for that advice, but it will be money well spent.

Everyone’s individual situation is different but you should remember that a pension is designed to provide an income for you in retirement. With people living longer than ever, you could be retired for many years and you need to consider how you will survive if you spend your entire pension fund now.

There is already evidence of high pressure telephone sale techniques and scams targeting the over 55s promising high investment returns. It is important that you deal with a regulated independent financial adviser and remember that if an investment sounds too good to be true, it normally is!

In summary, these changes will give pension investors and retirees much greater choice and flexibility, making pensions an even more attractive choice for saving than ever before. However, you should be careful that you don’t fall foul of any of the pitfalls mentioned above.


All content is for general guidance only. It provides an outline, and may not include points which are important in your case. You should not rely on this blog without taking individual advice based on the full facts of your case. The information given was correct at the time of publication.


 

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Understanding the impact of changes to company pension schemes

29th June 2011

According to the Mayan Calendar the world will come to an abrupt end on 21 December 2012!

If this prediction is correct, then employers will not have to worry about the changes which will take effect from October 2012 brought in by the recent Pensions Act. From 2012 all employers will be required automatically to enrol eligible staff into a pension scheme and contribute towards their retirement pension. This will be gradually introduced over a four year period, until all of the UK`s 1.3 million affected employers are included.

Employers will not have the option to opt out, but employees will. However those that do will be automatically re-enrolled after three years. All employers who do not have a qualifying workplace pension scheme will have to enrol staff into the National Employment Savings Trust (NEST) which is being launched as a low-cost pensions vehicle.

The minimum contribution levels will increase over a phase-in period, but eventually a minimum of 8% of an employee’s qualifying earnings must be paid into a pension. This is made up of a minimum of 3% employer contributions and a 5% employee contribution, of which 1% comes in the form of tax relief.

What should businesses be doing?

  • Find out their own implementation date
  • Consider current position
  • Evaluate cost projections
  • Review existing/new contracts of employment
  • Consider future salary increases as compared with increasing pension contributions
  • Put in place a good communications strategy to keep staff informed
  • Work with their financial adviser.

My advice to employers is to analyse any existing pension scheme arrangements and current contribution levels and calculate the potential future increased costs now so that any changes can be planned for.  This then needs to be effectively communicated and managed within the organisation to minimise any negative employee reactions.

What do you think about the new regulations?  Have you already embraced the changes or are you waiting until the last minute?

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Workplace pensions reform - webcast

19th December 2011

Significant changes, as introduced by the recent Pensions Act, will take effect on workplace pension schemes  from October 2012.  In this webcast, John Davenport, Cassons Pensions Manager explains the obligations of the employer and how to start planning now.  Information correct November 2011.  Some dates have changed and have been updated in John's blog December 2011 - Click here to see it.

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Workplace pensions - staging date update

1st February 2012

Following the Government's announcement late last year, that small businesses would be given extra time to prepare for auto-enrolment, a new timetable has now been released.

Companies employing 250+ individuals will not see any change to their staging date.

"Automatic enrolment will begin on time this October, taking up to 10 million people into pension saving - many for the first time ever, and all employers will be part of it" said pensions minister Steve Webb.
"We have done all we can to ease any burden on business the reforms will bring and employers of all sizes now know the date they need to start enrolling their staff."

The UK's largest employers will be expected to lead the way this October as scheduled, followed by medium sized employers and ultimately small companies. All existing companies, regardless of size will have to have introduced auto-enrolment by April 2017, with any new companies by February 2018. The new timescale means that 70 per cent of individuals will have been automatically enrolled by the next general election.

The level of pension contributions will be phased in over time to help employers and individuals adjust. Full contributions will have to be paid from 1 October 2018.

The table below sets out the revised automatic enrolment dates for all employer sizes.

Employer size (by PAYE scheme
size) or other description
Automatic Enrolment duty date
 
  From To
 
250 or more members 1 Oct 2012 1 Feb 2014
50 to 249 members 1 Apr 2014 1 Apr 2015
Test tranche for less than 30 members      1 Jun 2015 30 Jun 2015
30 to 49 members 1 Aug 2015 1 Oct 2015
Less than 30 members 1 Jan 2016 1 Apr 2017
Employers without PAYE schemes 1 Apr 2017  -
New employers Apr 2012 to Mar 2013 1 May 2017  -
New employers Apr 2013 to Mar 2014 1 July 2017  -
New employers Apr 2014 to Mar 2015 1 Aug 2017  -
New employers Apr 2015 to Dec 2015 1 Oct 2017  -
New employers Jan 2016 to Sep 2016 1 Nov 2017  -
New employers Oct 2016 to Jun 2017 1 Jan 2018  -
New employers Jul 2017 to Sep 2017 1 Feb 2018  -
New employers Oct 2017 Immediate duty  -

 

 

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Workplace pensions - what you need to know

24th October 2012

Starting from October 2012, every worker who meets the eligibility criteria will be enrolled into a workplace pension.  However don’t panic as there is a timetable detailing when businesses will be required to make workplace pensions available and this is determined by the number of employees.  I’ve set out the basics of the timetable below.

However just because you as an employer don’t have to respond to the new regime immediately, you should be planning for it now.  Again summarised details are below but you will ultimately reach a situation where the minimum employer contribution to the employee’s pension  is 3%.

Only employers with over 50,000 staff will be forced by law to offer their workers a company pension scheme in 2012.

However, by next year any employer with more than 500 staff  will be obliged to set up and contribute into a workplace plan for its employees.

In  2014 those employers with 250- 500 staff will be affected, whilst employers with less than 250 but more than 50 staff will be subject to the same rules between 1 April 2014 to 1 April 2015.

Employees with less than 50 but more than 30 staff will be affected from 1 August 2015 to 1 October 2015.

Finally, employers with less than 30 staff will be obliged to contribute from 1 January 2016 to 1 April 2017.

The rules for staging within each size grouping have still to be confirmed.

The contributions are also being phased in.  Initial contributions will be 2%, with at least 1% from the employer and potentially 1% from the employee. (0.8% after tax relief).

Thereafter contributions will rise to 5%, with a minimum employer payment of 2% and a potential employee payment of 3% (2.4% after tax relief).

Finally, from October 2018 the minimum total contribution will equal 8% with a minimum employer contribution of 3% and a potential employee contribution of 5% (4% after tax relief).

These percentage contributions will be based on qualifying band earnings probably between £5,564 and £39,853 per annum.

Eligible workers are all employees aged between 22 and state pension age. Contributions will have to be against total salary within band earnings, which may fluctuate to reflect overtime and bonuses. 

Individuals can opt out of the new regime by taking affirmative action, but will effectively lose the opportunity for compulsory employer and employee contributions if they do. They will automatically be opted back in every 3 years.

There are some very detailed requirements behind the summary above and if you have any queries or would like any advice on establishing a workplace pensions scheme, please do not hesitate to contact me.

John Davenport, Pensions Manager, Cassons.

Email: John.Davenport@cassons.co.uk

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Pensions auto-enrolment - latest news

25th July 2013

It's been dubbed the biggest shake-up of pensions in a generation, and will result in millions of workers being pushed into saving money for their retirement for the first time. Yet many employers are still in the dark about auto-enrolment.

The automatic pension enrolment system was introduced in October last year to encourage more individuals to save towards their retirement, with the number of employees signed up recently hitting the one-million mark after the Government started by targeting the UK’s biggest firms.

Under the scheme, employers must automatically enrol workers who choose not to opt out and who are not in an existing qualifying pension scheme, are aged 22 or over, are under State Pension Age, who earn more than £9,440 a year (in 2013/14) and work or usually work in the UK.

Employers will be required to contribute a minimum amount into the scheme on behalf of their workers. These will be phased in but are currently set at a total contribution of two per cent with at least one per cent of this coming from employers. These are then set to rise, meaning that by 2018 the total contribution will be eight per cent, with at least three per cent coming from employers.

The Government hopes the system will ease a pension crisis which has seen recent figures from the Office for National Statistics showing that the number of people paying into a company pension plan had reached the lowest level for 60 years.

As the Government continues to roll out the pension programme, companies with between 62 and 89 employees are this month receiving their staging date letters. Between now and 1 April, 2014, letters will follow to employers with between 50 and 62 staff and from receiving notification of their staging date businesses will have 12 months to comply with the new duties.

Employers should therefore be drawing up an action plan now, involving payroll, HR and possibly outside professional advice. You need to work out how any existing scheme fits in with the regulations. If you don’t have one then you’ll need to find one, and also assess your workforce in terms of who is eligible and who isn’t. You also need to consider who your provider will be, and work out how much it’s going to cost. Why is this so important? Well, basically, because it’s a compliance issue to stay on the right side of the law. Get it wrong and you could be facing some fairly hefty penalties.

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Auto enrolment - can you afford not to comply?

10th April 2015

No small business owner likes surprises, especially when it comes to staff.

But whilst many are aware that changes to workplace pensions require employers with at least one member of staff to enrol in and contribute to a workplace pension scheme and that there are financial penalties for not doing so, they may not realise that this is just one small part of what they could owe.

Delaying the setting up of a workplace pension scheme could leave small businesses with a cash flow nightmare: as well as facing financial forfeits from the Pensions Regulator, they’ll also have to cover the cost of back-dated contributions.

Take a firm with 100 employees which is three months late in meeting its auto enrolment duties. As well as the fines imposed by the Pensions Regulator, they’ll face a bill of £13,000 (on average) for backdated employer contributions.

A firm with 50 employees in the same position will owe around £7,000 in backdated payments.

On top of this, the Pensions Regulator also has the powers to force firms to pay outstanding employee contributions (in addition to their employer contributions) if they are more than three months late in signing up to auto enrolment process.

John Davenport, Director of Cassons Financial Planning Limited warns: “Employers who keep putting auto enrolment to the bottom of their list are going to be caught out. The financial ramifications for not complying, both in terms of penalties and contributions, can be huge. It really is best to find out how much it is going to cost, and when you need to begin the procedure to ensure you have budgeted for it.

“Firms should find out their staging date and make sure they’ve started planning at least 12 months in advance.

“Over the next 18 months approaching 400,000 employers will reach their staging date and the number of businesses looking to place their workplace pension scheme with providers will increase, with industry fears about how the market will cope with demand. This is why we are suggesting that businesses look at auto enrolment as soon as possible.”

“If you’ve already got a workplace pension scheme it’s not enough to think that it’s eligible – you must ensure it meets the criteria. Even after this, there is still work to be done to make it auto enrolment compliant.”

If you’re not already aware of your auto enrolment staging date you can email us at autoenrolment@cassons.co.uk with your PAYE reference number and we can make you aware of when you must have implemented your scheme by. We can also discuss a plan of action to meet your auto enrolment duties as an employer.


All content is for general guidance only. It provides an outline, and may not include points which are important in your case. You should not rely on this blog without taking individual advice based on the full facts of your case. The information given was correct at the time of publication.


 

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Implementing a workplace pension scheme

26th February 2015

We’re talking to many clients at the moment about workplace pensions and we’re hearing lots of questions about employee contracts. These relate in particular to amending or implementing workplace pension schemes to meet auto enrolment obligations.

To deal with the issues surrounding employee contracts we asked Claire Haworth, Senior Associate Solicitor in the Employment Team at Napthens, to share her experience.

“In seeking to comply with the requirements for pension auto-enrolment, many employers are finding that the terms of existing pension schemes need to change in one of two ways:

  1. an employer may have amended its existing scheme to ensure it meets the auto-enrolment criteria; or
  2.  an employer may have put an entirely new scheme in place which meets the requirements.

Employers need to check whether these changes also require changes to employees’ contracts of employment. An employee’s contract must set out any terms relating to pension.

For most, the contract will merely state that he/she may be eligible to join a pension and refer the employee to an explanatory booklet for more details. However, some contracts may give more information, such as the level of contributions or a waiting period before joining the pension scheme. You should be aware that these terms may be implied (i.e. through custom and practice) even if they are not express. This means that, when the terms of a pension scheme are changed as a result of auto enrolment, the contracts of current employees must also be changed.

There are three ways in which an employer can change a current employee’s contract:

  1. Obtain express consent from the employee;
  2. Unilaterally impose the change and rely on the employee’s conduct as evidence of acceptance of the change; or
  3. Terminate the employee’s employment and offer re-engagement on the new terms.

Option 1 is always the safest option. Option 2 is the most risky, as it may expose the employer to claims of breach of contract/constructive dismissal. Therefore, if express consent cannot be obtained, the employer could use option 3. However, before doing so, they will need to consult individually with each employee affected as a result of auto enrolment. If the employer proposes to dismiss and re-engage 20 or more employees, the employer should also consider commencing collective consultation (in addition to individual consultation), which involves electing employee representatives where necessary. Under option 3, an employee can still claim unfair dismissal. However, the employer can assert that the dismissal was for “some other substantial reason” and that it followed a fair procedure, which is potentially a good defence to this claim. In addition, the employee’s loss is likely to be limited to the change in pension terms.

Separate to the general consultation requirements above, the Occupational and Personal Pension Schemes (Consultation by Employers and Miscellaneous Amendments) Regulations 2006 (“the Regulations”) impose a specific duty on employers to consult on changes to a pension scheme in certain circumstances – regardless of whether or not the employees agree to the change. These Regulations only apply to employers that have 50 or more employees and only apply to “affected members” in respect of a “listed change” to the pension scheme. Broadly speaking, “affected members” mean employees who are active members of the pension scheme or who are eligible under their contracts of employment to join the scheme. An example of a “listed change” in a defined contribution scheme is increasing the level of member contributions. If the Regulations apply, the employer must consult with affected members for a minimum of 60 days. This is enforced by the Pensions Regulator with a maximum fine of £50,000.”

Claire Howarth, Napthens LLPClaire Haworth,

Senior Associate Solicitor,

Napthens

Claire.Haworth@napthens.co.uk
www.napthens.co.uk

 


You should always take specialist legal advice as appropriate.

All content is for general guidance only. It provides an outline, and may not include points which are important in your case. You should not rely on this blog without taking individual advice based on the full facts of your case. The information given was correct at the time of publication.


 

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ISAs - the transfer of tax breaks

26th January 2015

The Chancellor announced in the Autumn Statement that ISAs will be able to be passed on death to a surviving spouse or civil partner without losing the tax breaks. This has made this tax-wrapper even more valuable and should prompt married couples (and registered civil partners) to review their Wills or risk missing out.

The change is subject to legislation being finalised, but The Treasury has outlined the new rules. The surviving spouse will be given an additional one-off ISA allowance, equal to the value of the deceased's ISA holdings. This enables the assets which were in a spouse's ISA to continue to be sheltered into an ISA in their survivor’s name.

How it will work - an example

  1. An investor holds £60,000 of ISA savings and investments and dies on 07 January 2015.
  2. For the period from the date of death up to the distribution following the grant of probate, the benefits of the ISA tax wrapper are lost and the £60,000 becomes subject to income tax on any interest or dividend income generated, or capital gains tax where gains are made.
  3. Following probate, the value represented by the ISA passes to the surviving spouse.
  4. With effect from 06 April 2015, the survivor has a one off opportunity to shelter the £60,000 (in this example) into an ISA in his/her name in addition to his/her own £15,240 ISA allowance, giving a combined allowance of £75,240. This could be subscribed to a new ISA or to an existing ISA.

Will this save inheritance tax?

No, this change does not save inheritance tax.

The value of ISAs are subject to inheritance tax on death (with one main exception - where ISA investments qualify for business property relief, such as qualifying AIM shares that have been held for a two year period.)

However transfers of any assets between spouses on death are usually IHT free (provided the surviving spouse is UK domiciled). The change intends that the tax advantages of an ISA can be passed on to the surviving spouse, and there is no need give inheritance tax exemption as no such tax usually arises in these circumstances.

What might investors do now?

This change is just one of a raft of new rules introduced this year which may make ISAs more appealing to investors.

In order to benefit from this new tax break, it might be wise for couples to consider their Wills to ensure any ISAs are indeed left to each other.


All content is for general guidance only. It provides an outline, and may not include points which are important in your case. You should not rely on this blog without taking individual advice based on the full facts of your case. The information given was correct at the time of publication.


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Delays to auto-enrolment in work place pensions reform

9th December 2011

George Osborne announced in the autumn statement that two key elements of Workplace Pension Reform will be delayed.

Staging dates

Employers with fewer than 3,000 employees will see their staging put back, whilst employers with fewer than 50 employees will have staging dates delayed until “the next parliamentary session” (i.e. until after May 2015).

Employers with more than 3,000 employees will not see any changes to their staging dates. The pensions minister, Steve Webb, said the final timetable would be issued in January 2012.

Phasing

Phasing is the gradual increase in both the minimum employer contributions and the minimum total contributions required to satisfy the duties under Workplace Pension Reform.

The original plan required 1% employer contributions and 2% total contributions from an employers’ staging date until October 2016. From October 2016 until October 2017 minimum contributions of 2% employer and 5% total were required. From October 2017 the minimum contributions would have been 3% employer and 8% in total.

The rise in employers’ minimum contributions from 1% to 2% from 1 October 2016 will not now take place. There has been no confirmation of a new date and no clarity as to whether increases to total contributions will also be delayed.

Our comprehensive guide to Workplace Pension Reform is now available as a webinar - click and follow link.   Other new dates will be communicated as soon as the timetable is released. In the meantime, if you have any further questions please contact me!

John Davenport, Cassons Pensions Manager

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Automatic enrolment – make that New Year’s Resolution

9th January 2014

Over 2 million workers have now begun saving into a Workplace Pension Scheme as a result of automatic enrolment, according to figures released by The Pensions Regulator. This is a mere drop in the ocean when you consider by the General Election in 2015 this figure will have increased to 4.3 million workers and by 2018 to over 15 million employees.

This year alone will see a leap in the number of firms affected, with tens of thousands of medium sized employers introducing automatic enrolment. The Pensions Regulator is urging all employers to make sure they know when they must introduce the changes. Charles Counsell, executive director of automatic enrolment at The Pensions Regulator said: “If they have not done it already I would hope the first thing every employer does when they get back to work after the Christmas break is to check their staging date and prepare for automatic enrolment. The clock is ticking and if employers don’t plan ahead, they could face unnecessary challenges and costs in the New Year”.

Employers who are not working on an automatic enrolment plan at least six months prior to their staging date are risking non-compliance and this will almost certainly result in a more complex and more expensive solution. It has been reported that pension providers are approaching a capacity crunch and even refusing employers who are within a six month lead in time to their staging date. Don’t just assume the first provider you contact will be able to help you.

In addition to the above, one of the most surprising aspects is that it’s not all about the pension scheme. All employers are going to have to consider their payroll system and contracts of employment. Let’s consider payroll first. The ideal system will assess the workforce, produce relevant paperwork for each category of worker, calculate contributions, produce a file for onward transmission to the pension provider, deal with opt-outs, provide audit trails, cope with salary exchange, and do the auto enrolment all over again every three years. Have you checked what services your payroll provider is offering? And, if payroll can assist you, at what cost? And, will the service be available from your staging date?

And then there are the employment contracts. Does your standard contract even mention pensions? If not, it will need to. If it does, is pension scheme membership linked to completion of a probationary period? Does the contract specify the basis of contributions? Is age mentioned in contracts?

In summary, in addition to identifying an appropriate pension scheme, we would also recommend that employers:

• assess their workforce to identify who should be auto-enrolled
• check their payroll systems to ensure they will support auto-enrolment
• ensure that personnel records are up to date
• review existing contracts and make any required amendments

This article was last checked January 2014.
This article is for general guidance only. It provides an outline, and may not include points which are important in your case. You should not rely on this answer without taking individual advice based on the full facts of your case. The information given was correct at the time of release.

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State pension top up opportunities

22nd September 2015

In the Autumn Statement 2013 the government announced its intention to introduce a scheme to allow pensioners to top up their additional State Pension with a new class of voluntary National Insurance contribution to be known as Class 3A. This will allow some of today’s pensioners and those close to pension age to boost their retirement incomes.

In the Budget Statement in March 2014 the government announced more details about how the scheme will work. The Minister for Pensions announced further details and the rates of the Class 3A contributions in a statement in April 2014.

The scheme will open in October 2015 and will be available to all pensioners who reach State Pension age before the introduction of the new State Pension in April 2016. The scheme is expected to run for 18 months.

Class 3A will give pensioners an option to top up their pension by up to £25 a week in a way that will protect them from inflation and offer protection to surviving spouses. In particular, it could help women, and those who have been self-employed, who tend to have low additional State Pension entitlement.

From 12 October 2015 to 5 April 2017 you’ll be able to make a ‘Class 3A voluntary contribution’ to top up your State Pension by up to £25 per week.

To be able to benefit from this opportunity you must be:
entitled to the basic State Pension or Additional State Pension before 6 April 2016 and either
a man born before 6 April 1951 OR a woman born before 6 April 1953

You can choose to top up your State Pension by between £1 and £25 per week. How much you’ll need to contribute depends on:

how much extra pension you want to get each week
how old you are when you make the contribution

So for exampleyou are a 68 year old male in October 2015. You decide that you want to get an extra £5 per week (£260 a year) on top of your pension.

The cost of an extra £1 per week for a 68 year old is £827, so you multiply £827 by 5. You will make a lump sum payment of £4,135.

The opportunity window is limited but it may suit many, but not all, pensioners. As always take further advice so that you understand the implications before you proceed.

All content is for general guidance only. It provides an outline, and may not include points which are important in your case. You should not rely on this blog without taking individual advice based on the full facts of your case. The information given was correct at the time of publication.

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Have you considered a workplace pension for your nanny, cleaner or housekeeper?

28th April 2016

Doubtless you will have seen some of the Government’s publicity surrounding workplace pensions, also known as workplace pensions. And you may have thought that, as your business obligations have been dealt with by your internal team,  it does not apply to you. However if you employ anyone through your family (eg a nanny, housekeeper or cleaners) and they are not included in your business PAYE scheme, they may still be eligible for a workplace pension.

Auto enrolment (AE) has been happening for many larger companies (those with 250 employees or more) since October 2012. A further 770,000 employers who have between 1 and 30 staff must provide and pay into a pension for their employees over the next 18 months.

It might seem like a boring administration task, but it’s one that can land you in a lot of hot water if you don’t comply within the deadlines.

What is automatic enrolment?

Auto-enrolment is a new Government scheme that makes it compulsory for businesses to automatically enrol their employees in a pension scheme.

All employers will need to work out whether automatic enrolment applies to them. If you have at least one member of staff who is paid via a PAYE scheme, then AE duties apply.

What many people don’t realise is that families who employ staff, such as your spouse, nanny, cook or cleaner are treated as employees under the auto-enrolment rules, and you will be expected to provide and pay into a pension for them.

If you employ your spouse, have a nanny or cleaner and are unsure how the new legislation will affect you, here are some answers to your questions.

Are all family employed spouses, nannies, cooks and cleaners eligible?

Most will be. If your employee:

• is over 22 and below state pension age
• earns more than £10,000 per year

You will be required by law to pay to set up and pay into a pension scheme.

If your employee:

• is less than 22 years of age
• earns over £5,824 but less than £10,000

You are not required by law to set-up and pay into a pension. However, they are entitled to ask to be auto-enrolled. If they do, you are required by law to set-up a pension and contribute to it.

If you employ staff such as a gardener or window cleaner, you will not be required to enrol them, because in almost all circumstances they are self-employed and do not earn the majority of their income from your custom alone.

Can a worker opt-out?

Yes. However, workers cannot be asked to in any way. If found guilty of persuading an employee to opt-out and go self-employed, you can face a hefty fine.

When will these changes take place?

Auto enrolment is being brought in gradually. The date when the legislation will be applicable to you is called your staging date, and is calculated using the last two characters in your PAYE reference number.
We can find your staging date for you if you like. All we need is your Employer PAYE reference number. If you don't know your PAYE reference, it can be found on a P6/P9 coding notice or on your white payslip booklet P30BC.

What if I don't do anything?

The Pensions’ Regulator has compliance and enforcement powers to deal with firms who fail to comply on time. To date it has fined 1,594 firms a £400 fixed penalty, with a further 31 fined escalating penalties which range from £50 to £10,000 a day!

Next step?

As accountants and business advisers with our own financial services team through Cassons Financial Planning Limited, we are ideally placed to provide a straightforward approach to help you review the impact of auto enrolment on your business and then help you with the implementation of the pension scheme. As experienced advisers to group pension schemes we are aware that the reality of implementation is much more complex than the bullet points above may suggest.

Your auto enrolment obligations then extend to your monthly payroll and through Cassons Payroll Bureau we will be happy manage your payroll.

We’d be delighted to give you a quotation to advise and set up your pensions scheme, and also your payroll. You may even choose to review your own personal pension at the same time!

Please contact us for further details.

All content is for general guidance only. It provides an outline, and may not include points which are important in your case. You should not rely on this blog without taking individual advice based on the full facts of your case. The information given was correct at the time of publication.

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