Category: Auto Enrolment

Have you Auto Enrolled your employees in a Pension?

group of successes people

Over 100,000 small and micro employers reach their staging date by the end of the year.

So what do you need to do before you stage?

  1. Find out your staging date, this the date when your obligation under Auto Enrolment will start, the Pension Regulator calculator is a good place to start
  2. Nominate a person to be the Pension Regulators key contact and register their name with the Regulator
  3. Draw up a Project Plan and consider whether you need help (60% of companies currently staging have decided they do need help! and most businesses will start by asking their accountant to help with project management)
  4. Choose a Pension Provider – Nest, Now Pensions and The Peoples Pension are the 3 largest

The fine for small employers with 1 to 4 staff who fail to comply with an EPN is £50 per day and for those with 5 to 49 it is £500 per day.

The Pension Regulator statistics for the first quarter of 2016 show that the number of fixed penalties were 806 compared to the penalties for the whole year of 2015 which were 1,250, so penalties are increasing, partly due to increasing numbers of small businesses being required to enrol.

The Pensions Regulator (TPR) has highlighted the following problem areas:

  1. Employer forgeting to do the declaration of compliance within 5 months of staging, many employers wrongly assumed that registering on the Government Gateway was enough.
  2. Confusion caused by running multiple payrolls for the same employer for example weekly and monthly
  3. Completing the declaration of compliance but without choosing a pension provider
  4. Omitting self employed workers who have a contract to provide work personally

 

steve@bicknells.net

Don’t ignore work place pensions – the regulator will fine you!

I want you

The fine for small employers with 1 to 4 staff who fail to comply with an EPN is £50 per day and for those with 5 to 49 it is £500 per day.

The Pension Regulator statistics for the first quarter of 2016 show that the number of fixed penalties were 806 compared to the penalties for the whole year of 2015 which were 1,250, so penalties are increasing, partly due to increasing numbers of small businesses being required to enrol.

Staging Dates

 

 

Charles Counsell, Executive Director for automatic enrolment, said: “Most employers comply on time and we continue to see compliance rates in the high nineties. Others need a nudge and are prompted to meet their duties when one of our notices comes through their letterbox.

“It’s simply not fair for staff not to receive the pension contributions they are legally due. But failing to act also means an employer risks clocking up a significant penalty until they put things right.

“Our message remains that if things aren’t going well, then talk to us; don’t ignore us.”

steve@bicknells.net

A new type of employment status

The Office of Tax Simplification – Employment Status Report – March 2015 suggests we could see a new type of worker being created, part way between Employed and Self Employed. We could also see the term office holder removed from legislation.

Contractor Weekly reported – This involves the introduction of a new category of worker, a ‘third way’ between the employed and self-employed, acknowledging that some workers do not fit easily into either of the two traditional positions and that they should be subject to a modified set of tax rules. Freelancers might fall into this ‘third way’ and who might be seen as people who have chosen this route of working and want certainty over their status.

Click on this link to read the Employment Status Report

Will this solve the IR35 problem? who will it defined? what should the rules be?

Workers

 

steve@bicknells.net

Is your pension going Dutch?

Amsterdam, canals and bikes

I love Holland but are their Collective pensions better than ours?

Collective funds pool all contributions into one big fund, so the administration costs are lower and pensions are paid from the fund rather than having to buy annuities.

By running funds collectively rather than individually (the British model) costs are reduced.

Some experts suggest that savers will increase their investment returns by 30%.

An article in the Telegraph 3rd June 2014 commented…

What is certain is that the schemes are a long way from the final salary “gold standard”. There are no guarantees, not even the certainty of a fixed income that you get with an annuity. You may get inflation-linked increases, you may not.

Assuming that these schemes do become available in the coming years, the best course for most workers would probably be to use them for some, not all, of their pension savings, with the rest in traditional schemes, self-invested pensions or Isas.

But will they ever see the light of day? There is little incentive for companies to back them – finance directors remember what happened with final salary schemes, which drove many firms to the brink of bankruptcy thanks to endless “gold-plating”.

So will your pension be going Dutch?

steve@bicknells.net

5 Auto Enrolment things you must do before Staging

Young woman with checklist over shoulder shot

If you are an employer you can’t afford to mess up Auto Enrolment, the penalties are harsh!

Even a small employer will need 6 months to prepare and larger employers could take up to 18 months.

So what do you need to do before you stage?

  1. Find out your staging date, this the date when your obligation under Auto Enrolment will start, the Pension Regulator calculator is a good place to start
  2. Nominate a person to be the Pension Regulators key contact and register their name with the Regulator
  3. Draw up a Project Plan and consider whether you need help (60% of companies currently staging have decided they do need help! and most businesses use a service like www.business-accountant.com to help with project management)
  4. Choose a Pension Provider – Nest, Now Pensions and The Peoples Pension are the 3 largest
  5. Makesure your Payroll can provide the analysis needed

In addition you will need to work on elements of the Project Plan such as Assessing the Workforce, Letters to Employees, Considering Postponement etc

There is a lot to do and its complicated!

 

steve@bicknells.net

 

 

Can you cope with Auto Enrolment?

Retro Drama Woman

A survey by AutoenrolSME found that 6 out 10 businesses can’t cope and hired additional staff to manage the process!

A Poll in April 2014 of 200 businesses with 62 to 249 employees found:

63% of the employers didn’t know when their staging date was.
58% had not set up an auto-enrolment pension scheme.
90.5% of employers without an auto-enrolment pension scheme hadn’t even started researching one.

If you think you can ignore Auto Enrolment, think again, The Pensions Regulator will make you comply……..

Non-statutory action
We can issue guidance and instruction by telephone, email, letter and in person. Or we can send a warning letter confirming a set time frame for compliance with the duties.
Statutory notices
Statutory notices can direct you to comply with your duties and / or pay any contributions you have missed or are late in paying. We have further discretionary powers which allow us to estimate and charge interest on unpaid contributions and direct you to calculate and / or pay unpaid contributions.
Penalty notices
We can issue penalty notices to punish persistent and deliberate non-compliance.
A fixed penalty notice will be issued if you don’t comply with statutory notices, or if there’s sufficient evidence of a breach of the law. This is fixed at £400 and payable within a specific period.
We can also issue an escalating penalty notice for failure to comply with a statutory notice. This penalty has a prescribed daily rate of £50 to £10,000 depending on the number of staff you have.
We can issue a civil penalty for cases where you fail to pay contributions due. This is a financial penalty of up to £5,000 for individuals and up to £50,000 for organisations.
Where employers fail to comply with a compliance notice or there is evidence of a breach, we can issue a prohibited recruitment conduct penalty notice. This is currently set at a maximum fixed daily rate of £5,000 for organisations with over 250 staff. We aim to fully recover all the penalties that we issue.
Court action
We can take civil action through the court to recover penalties.
Employers who deliberately and wilfully fail to comply with their duties may be prosecuted.
We can also confiscate goods where there is a criminal conviction and restrain assets during criminal investigations.

The first case was Dunelm http://www.thepensionsregulator.gov.uk/docs/section-89-dunelm.pdf

Research shows that Accountants are most likely to be asked to help SME’s and Business Accountant (a service provided by CIMA Members in Practice) have created a booking service to assist SME’s in getting help http://business-accountant.com/auto-enrolment/

So don’t be scared by Auto Enrolment, don’t delay drawing up a project plan, take action now to avoid problems with the Pension Regulator later!

steve@bicknells.net

 

New Pension Proposals Explained

This is exactly how I pictured the partners lounge

The most talked about and biggest surprise in the Budget was the announcement on changes to pensions.

Under the current system three quarters of those retiring had to buy an annuity with only very small or very large pensions having flexibility.

Old Pension

From April 2015 the system for accessing defined contribution pensions at retirement will be….

New Pension

Under the current tax system, people are charged 55% if they choose to withdraw all of their defined contribution pension savings at the point of retirement. This means the majority of people instead purchase an annuity and receive taxable income over the course of their retirement. Under the new system, an individual will be able to withdraw their savings at a time of their choosing subject to their marginal rate of income tax. The government anticipates that under these circumstances some people will choose to draw down their pension sooner in order to suit their personal situation. This will increase income tax revenue in the short to medium term.

…. Budget Report 2014

steve@bicknells.net

Do you think it should be compulsory to pay into a pension?

Pension Scheme

A government think thank, Policy Exchange, have urged the government to make it compulsory that people save for their retirement. Their proposal the ‘Help to Save’ Scheme is aimed at avoiding 11 million people ending up in ‘Pension Poverty’. In a BBC article….

James Barty, author of the report, said the lack of people saving for their retirement was putting an “intolerable burden on the state” which “needs to be addressed sooner rather than later”.

He said: “With an ageing population, putting money aside for later life should be seen in the same context as National Insurance contributions, taxes and even education – an obligation that falls on everyone in society.

“‘Help to Save’ will prevent the state from having to pick up the tab for people who haven’t put aside enough money for later life.”

Under the plans, the opt-out in the Government’s auto-enrolment scheme would be removed making it obligatory for people to save for their retirement

Individual pension contributions would also increase as incomes rise over time.

According to the report, someone earning the average wage – £27,000 – will need to save over six and a half times more than they currently do to generate the Government’s recommended retirement income of £16,200.

The average pension pot is estimated to be just £36,800, which on current annuity rates is enough to generate a retirement income of £1,340.

The paper said that an average earner would need a pot of £240,000, assuming they receive the full single tier pension.

Are you saving enough for your retirement? should saving be compulsory?

steve@bicknells.net

 

How to carry forward unused pension allowances

Taking money

If your total pension savings for the tax year are more than the annual allowance you can carry forward any unused allowance from the previous three years to the current tax year. You only have to pay tax on any amount of pension savings in excess of the total of:

  • the annual allowance for the tax year
  • any unused annual allowance you carry forward from the previous three years 

You can only carry forward unused annual allowance if during the tax year you were in either:

  • a registered pension scheme
  • an overseas pension scheme and either you or your employer qualified for UK tax relief on pension savings in that scheme

There’s a strict order in which you use up your annual allowance. First you use the annual allowance from the current tax year followed by any unused annual allowance from the previous three tax years, using the earliest tax year first.

There are special rules when carrying forward annual allowance for tax years 2008-09 to 2010-11. You should calculate the amount of available annual allowance using an annual allowance rate of £50,000 and using the current method of valuing your pension savings amount- more in the link below.

Example

Sam made total pension savings of £80,000 in 2012-13. Sam has been a member of a pension scheme since June 2010. His pension savings for the previous three years are as follows:

2009-10: £0 – he wasn’t a member of a pension scheme

2010-11: £30,000

2011-12: £0 – although he was a member of a pension scheme

Sam can carry forward £70,000 unused annual allowance to 2012-13 calculated as:

2009-10: £0 – because he wasn’t a member of a pension scheme

2010-11: £20,000

2011-12: £50,000

Even though Sam didn’t make any pension savings in 2011-12 he did belong to a pension scheme so he can carry forward all of his unused annual allowance.

The annual allowance for 2012-13 (£50,000) plus the carried forward annual allowance (£70,000) is £120,000.

Sam doesn’t have any tax to pay on his pension savings of £80,000 for 2012-13 as it’s less than the total annual allowance available of £120,000. He also has £40,000 unused annual allowance (from 2011-12) to carry forward to 2013-14.

Tax Year

Annual Allowance

2006/07

£215,000

2007/08

£225,000

2008/09

£235,000

2009/10

£245,000

2010/11

£255,000

2011/12

£50,000

2012/13

£50,000

2013/14

£50,000

2014/15

£40,000

 steve@bicknells.net

Will Temp Agencies avoid Auto Enrolment by using Postponement?

Pension background concept

The date workers are enrolled depends on the size of the company they work for and is being rolled out over the next six years (this is called a staging date).
  • Large employers (with 250 or more workers), have started automatically enrolling their workers and will continue to February 2014 (some employers may choose to start earlier)
  • Medium employers (50 – 249 workers) will have to start automatically enrolling their workersfrom April 2014 to April 2015
  • Small employers (49 workers or less) will have to start automatically enrolling their workers from June 2015 to April 2017
  • New employers (established after April 2012) will have to start automatically enrolling their workers from May 2017 to February 2018
  • Employers who chose to use Defined Benefit or Hybrid Schemes can delay their staging date until 30 September 2017

You can postpone the start of Auto Enrolment for up to 3 months and then re-test for eligibility using this method could mean that Temporary Staff Agencies could avoid Auto Enrolment for their temps. This also means that many agencies will use NEST because other pension schemes will not want to sign them up as they many not actually receive any contributions.

Pinsent Masons blogged:

Agency workers are different from other workers and so present particular challenges. Many are seeking work for only a short period. Many will register with a number of different agencies and will, in fact, only be ’employed’ by a particular agency for a short period. The auto-enrolment obligation applies to all workers who meet the age and earnings thresholds, but there are options which may assist those employing high churn groups of workers.

Employers can make workers wait up to three calendar months before enrolling them into a pension scheme. If the worker has left by the end of that three-month period, then there is no need to provide that worker with a pension.

If you do postpone, make sure you follow the rules otherwise there could be harsh penalties under the Pension Act 2008 Section 45

Offences of failing to comply(1)An offence is committed by an employer who wilfully fails to comply with—

(a)the duty under section 3(2) (automatic enrolment),

(b)the duty under section 5(2) (automatic re-enrolment), or

(c)the duty under section 7(3) (jobholder’s right to opt in).

(2)A person guilty of an offence under this section is liable—

(a)on conviction on indictment, to imprisonment for a term not exceeding two years, or to a fine, or both;

(b)on summary conviction to a fine not exceeding the statutory maximum.

steve@bicknells.net