Category: Hmrc books and records checks

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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