Tag: Pension

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

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

 

10 tax allowances we fail to claim

Tax Money

In 2012 Unbiased.co.uk reported that £12.6 billion was unclaimed by UK tax payers, here is a list with some ideas:

  1. Income Related Tax Credits – Check and find out what you are entitled to – UK Benefits https://www.gov.uk/benefits-adviser
  2. Tax Relief on Pension Contributions – There are estimated to be over 4 million people not paying into a pension, auto enrolment should help to change that, this blogs explains the tax advantages http://stevejbicknell.com/2012/05/02/why-invest-in-a-pension-because-of-tax-relief/
  3. Tax Relief on Charity Donations – Are you using Gift Aid? are you a higher rate tax payer entitled to additional relief?
  4. Saving on Inheritance Tax – Many people don’t have a Will let alone any IHT planning!
  5. Making Use of ISA’s – Why get taxed on the interest on your savings if you could have an ISA? Its easy to get an ISA and you can still have access to your ISA savings if you need it, the current ISA allowance is £11,520 or £5,760 for cash ISA’s
  6. Child Benefit – Use the benefits adviser to check if you can claim – UK Benefits https://www.gov.uk/benefits-adviser
  7. Avoiding tax penalties and late filing – This just requires you to be organised, make sure you know the filing dates http://www.hmrc.gov.uk/sa/deadlines-penalties.htm and get the information needed in plenty of time
  8. Savings on Capital Gains – The current allowance for 2013/14 is £10,900 (previously £10,600) for an individual many people seem to forget they have this allowance
  9. Making Use of Employee Share Schemes – The government love employees to have shares and this year introduced a new share ownership option http://stevejbicknell.com/2013/08/03/employee-shareholders-will-your-employees-want-shares/
  10. Income Tax and Personal Allowances – Consider who should own assets (and get income from those investments)  – you or your spouse – so that you can minimise your tax liability

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

3 ways to comply with Employer Auto Enrolment Obligations

This is exactly how I pictured the partners lounge

Auto Enrolment has arrived and there is a lot to do……

The Pension Regulator website will help you create a stage by stage plan working back from the date when you need to start (staging date), it is a useful planning tool http://www.thepensionsregulator.gov.uk/employers/planning-for-automatic-enrolment.aspx

Most schemes will be set up with one of the following providers:

NEST – National Employment Savings Trust – NEST was originally created by the government – limited help for employers

The Peoples Pension – B&CE – B&CE is well known in the Construction world, they have online tools to help you

Now: Pensions – ATP (Denmark) – 45 year experience in pensions and many awards

You could use another provider and you should take independent expert advise, never give pension or investment advice unless you are qualified to do so.

If you are asked for advice remember to say ‘I know nothing’

But as an employer you do need to select a pension scheme for Auto Enrolment.

Then you need to consider how you will comply with your responsibilities and keep records for:

  • Contributions
  • Opting Out
  • Opting In
  • Earnings
  • Employee Records
  • Communication with Employees

Take a look at this video for middleware to get an understanding of how you could manage your compliance requirements

So here are your 3 basic ways to comply:

  1. Small Employers – you may decide to do it yourself using information on the Pension Regulators website and provider of your choice
  2. Pension Provider Portals – schemes like the Peoples Pension will have portals and tools to help you manage your auto enrolment pensions but it won’t cater for other benefits and other schemes
  3. Middleware – like the video above, this gives lots of functionality and will allow you incorporate other schemes and benefits but its not free

You might also find this blog worth reading ‘10 things you need to know about Pension Auto Enrolment’

steve@bicknells.net

Save for Children but save tax where you can

Mother and daughter with piggy bank

Many parents, grandparents and other family members like to save for children but are you paying tax on the interest?

The £100 Rule

HMRC Form R85 is used to claim interest tax free but what you might not realise is that despite your child having a personal tax allowance from birth there is a maximum of £100 per year which can earned tax free in interest and dividends earned on parental/family gifts.

So for 2 parents that’s £200 plus grandparents have the same exemption, but if the interest exceeds the limit even by a small amount, the exemption is lost and whole amount of interest becomes taxable.

Junior ISA

Children can have an ISA in their name, the maximum annual contribution limit is £3,720 (2013/14) in cash or shares but the money will be locked in until the child is 18. The £100 rule doesn’t apply to ISA’s.

Pension

Yes, crazy as it might sound your baby can start a pension plan.

You can receive 20% tax relief even if you don’t pay tax. The maximum you can contribute is £3,600 gross – a payment of £2,880 to which the taxman adds £720. This is the case even for people who don’t pay tax, such as children and non-earning spouses.

steve@bicknells.net

Are you missing out on money you’re entitled to?

Pot of gold coins isolated on white

You could be missing out on money that is owed to you:

UK Benefits https://www.gov.uk/benefits-adviser

The benefits adviser checks if you’re eligible to claim:

  • Attendance Allowance
  • Bereavement Allowance
  • Bereavement Payment
  • Carer’s Allowance *
  • Carer’s Credit
  • Child Benefit *
  • Child Tax Credit *
  • Constant Attendance Allowance
  • Disability Living Allowance
  • Employment and Support Allowance *
  • Guardian’s Allowance
  • Housing Benefit *
  • Incapacity Benefit
  • Income Support *
  • Industrial Injuries Disablement Benefit
  • Jobseeker’s Allowance *
  • Maternity Allowance
  • Pension Credit *
  • State Pension
  • Statutory Adoption Pay
  • Statutory Maternity Pay
  • Statutory Paternity Pay
  • Statutory Sick Pay
  • War Widow’s or Widower’s Pension
  • Widowed Parents Allowance
  • Working Tax Credit *

(*) – For these benefits, you’ll also get an estimate of how much you might get.

Lost Pensions https://www.gov.uk/find-lost-pension

The Pension Service will help you track down any lost pensions, if you’re not retired you might be able to consolidate all your pensions to get a better return.

Unclaimed Assets and Forgotten Funds http://www.unclaimedassets.co.uk/

Assets are considered dormant when contact with the owner is lost – typically due to a name change after marriage or divorce, an unreported change of address or expired postal forwarding order, and incomplete or illegible records.

It’s important to note millions of family members remain unaware they’re entitled to collect unclaimed assets owed deceased relatives, who passed on without leaving updated financial records for their heirs.

The majority of this lost money comes from dormant bank accounts, orphan pensions, unknown windfalls, missing shares and abandoned dividends, forgotten life insurance policies, National Savings Certificates and Premium Bonds which have not been redeemed; but also included is £300 million in unclaimed National Lottery winnings!

Lost Savings and Bank Accounts http://www.mylostaccount.org.uk/

If you think you may have lost touch with your account or savings, this website will guide you through some simple steps to help reunite you with your money. This is a FREE service and is brought to you by the British Bankers’ Association, the Building Societies Association and National Savings and Investments.

steve@bicknells.net