Category: Pensions

Common Auto Enrolment mistakes..

14975526361_d496e12032_m

The Pensions Regulator (TPR) has recently highlight 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

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

15 Brilliant Tax Free Benefits in Kind

Tax Free Bags Represent Duty Exempt Discounts

It’s P11D time, but have you considered giving your employees benefits in kind that are tax free, here are some to choose from:

  1. Pensions – Up to £40k can be paid in to you pension schemem by your employer (2014/15)  and you can use carry forward to pay in even more
  2. Childcare – Up to £55 per week but check the rules to makesure your childcare complies (HMRC Leaflet IR115)
  3. Mobile Phone – One per employee
  4. Lunch – Tax Free Lunch Blog
  5. Cycle Schemes – Cycle to Work Blog
  6. Fitness – Fitness Blog
  7. Parties and Gifts – Christmas Blog
  8. Parking – Parking Blog
  9. Business Mileage Allowance – 45p for the first 10,000 miles then 25p
  10. Long Service Award – A bit restrictive as you need 20 years service, the tax free amount is £50 x the number of years
  11. Eye Tests and Spectacles – The Eye Test must be needed under the Health & Safety at Work Act
  12. Suggestion Schemes – Suggestion Scheme Blog
  13. Insurance such and Death in Service and Income Protection – Medical Insurance Blog
  14. Travel Expenses – Travel Blog
  15. Working From Home – Working from Home Blog

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

 

 

5 reasons to move business premises into your pension?

A donut store, bakery, fish and chips store and a pet shop

Often business premises are owned by the business, this could be for many reasons for example the business has multiple owners or it helps to increase the business net worth.

But in many cases it would be better for the premises to be owned by the business owners pension fund because:

  1. The object of the business is not to own its own property, the objective should be for the business to make profits from trading
  2. The business could use cash tied up in the premises to invest in trading activities
  3. Pensions are a very tax efficient method of ownership – no capital gains, no tax on rental profits
  4. Company Pension Contributions are Tax Deductible and Individual contributions get income tax refunds
  5. You may be able to use 3 year Carry Forward to get funds into your pension scheme

In summary to move your business premises from your business to a SIPP or SSAS pension you would do the following:

  • Find a lender prepared to lend a third of the property value to your pension scheme  (which will be half the value of the fund ie if the property was valued at £300k, your pension could borrow £100k which is 50% of the £200k which will need to be funded by your pension scheme)
  • Have the premises independently valued and rent assessed and appoint solicitors
  • Create a SSAS or SIPP pension (you can include other people in your SSAS or SIPP investments)
  • Transfer into your SSAS or SIPP any funds you have in other pension schemes
  • As you are the business owner and its your pension scheme your business could make a payment into your pension scheme, the maximum for the last 3 years would be £140k (£50k + £50k + £40k) see details of NRE
  • The pension contribution from your company could be an In Specie payment (meaning its in kind not cash)
  • You could make a personal payment to your pension and if you are a higher rate tax payer your will get a tax refund via your self assessment return
  • Then your pension scheme buys the premises from your business and rents it back to the business

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

 

How to use the new UK pension rules to make £500….

CASH ICON

Here is the theory….

  1. You pay £8,000 into a defined contribution pension fund
  2. Its topped up by £2,000 (tax back from the government)
  3. So that’s £10,000 in your pension pot
  4. You take out £2,500 (25%) tax free
  5. You then pay 20% tax on £7,500 = £1,500
  6. So £8,000 in + £2,000 credit – £1,500 tax = £8,500 which is £500 more than you paid in

This is based on the HMRC rules.…

You must be at least 60 years of age to take your pension pot as a lump sum.

You may qualify to take all of your pension pot as a lump sum if:

  • one of your pension pots is worth £10,000 or less

If a lump sum is paid instead of a small pension before you started to get that pension, only 75 per cent of the lump sum is taxable.

There will be some charges from your pension provider but these should be small, take look at this list for a comparison

ABI data suggest that 25% of pension pots are less than £10,000

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

Budget 2014 – Pensions you can spend, hooray!

Pot of gold coins isolated on white

Thank Mr Osborne, its been a long time coming but an end to being forced to buy an annuity is coming….

From April 2015, pensioners will have the freedom to cash in as much or as little of their pension pot as they want, removing the need to buy an annuity.

We will now have the choice of taking a lumpsum, drawdown over time or buy an annuity.

The news wasn’t good for Life Insurance Companies who saw £4.4m wiped off their value yesterday.

If you do want to buy an annuity you be able to get free independent advice.

There will also be a new NS&I Pensioner Bond savings scheme to be available from January to all people over 65, paying interest rates of 2.8% for one-year bonds and 4% for three-year bonds.

From 27th March 2014 small penion pots can be cashed in, the ABI say that 25% of annuity sales related to pension pots of less that £10,000.

“Savers with pension pots of less than £30,000 can now take this out as cash, in what is a welcome lifeline for savers with small pension pots,” says David Macmillan, managing director at life and pensions provider Aegon UK.

There are still rules and the changes apply to Defined Contribution Schemes not Defined Benefit Schemes but this is a massive change in pension rules.

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