Posts Tagged ‘Auto-enrolment’

Will pension compliance cost you 10% of payroll?

Auto-enrolment could increase employers’ payroll costs by 10% according to research from Eversheds.Pile of Pound Coins

The legal firm surveyed 245 companies and found that more than half thought the cost of complying with the new pension rules would be as high as 10% of payroll. The biggest challenge was though to be the additional administration required.

Nearly 60% of those surveyed said they wouldn’t reduce costs by limiting future pay rises. However 16% said they would consider it.

On a positive note the 93% were confident they would be ready by their staging date.

Two of the biggest challenges were getting key messages over in simple terms and getting workers to understand the reasons behind automatic enrolment.

About a third of companies thought it likely that they’d have  to communicate different messages to different categories of workers.

When asked the one thing they’d change 41% said they’d allow workers to opt-out before being enrolled. Another 20% wanted the earnings threshold to be removed from the eligibility criteria, so that employers would not have to continually monitor workers’ earnings.

Steve Clark


Salary Sacrifice–Minimum Time?

Clock Flickr Dee'Lite SmallWe’ve been getting a number of questions from our clients regarding the minimum amount of time that a salary sacrifice agreement must be in place for.

This has come into sharper focus when looking at the new pension rules from October 2012 that will mean that employers have to automatically enrol employees into a workplace pension. Well those all round good eggs at HM Revenue & Customs have kindly produced an FAQ on the subject.

You can read the document here in all it’s glory.

The interesting part is when they discuss the new rules. HMRC says:

“Consequently, it is not necessary to stipulate a period for which the arrangement must be entered into or to set out "lifestyle changes" in relation to salary sacrifice for the workplace pension scheme.”

That’s good news for employers who have often struggled to define “lifestyle changes” to their employees. It also helps to reassure employers that they won’t be liable for a tax bill if the employee opts out of salary sacrifice.

It’s worth remembering that salary sacrifice needs to be established carefully and is a balance between changing your employees contracts and altering your benefit contributions. As always, it’s worth making sure that you get some advice when setting up a new arrangement.

Steve Clark


Huge numbers of workers may be missed out of auto-enrolment

Nest-Golden-Eggs-500w-300x200The Pensions Regulator published guidance earlier in the year warning employers preparing for Auto-Enrolment (AE) that they could not rely solely on a person’s tax status or any other single factor to determine if they were a worker or self-employed.

There is now evidence from a number of actuarial consultants and legal firms that companies could be missing large numbers of eligible workers out of their auto-enrolment plans because they wrongly believe they are classed as self-employed or consultants.

Reports suggest that the audit of one client’s workforce had identified 1,000 extra eligible workers that the company did not realise would have to be auto-enrolled. Another audit at a firm uncovered an additional 500 people needing to be enrolled – increasing the total number by about 10%. This prompted comment that, “the best advice is that if it looks like a worker and smells like a worker, it is a worker.”

The designation of someone as self-employed doesn’t necessarily mean they are and other factors need to be considered including the number of hours and the location of work, the pay structure agreed and factors such as whether the person is provided with tools, a uniform or business cards.

The list of status indicators given by the Pensions Regulator is clearly not exhaustive and businesses are warned that in cases of doubt the watchdog would probably take the most cautious interpretation and class any group in question as workers.


Sources: www.professionalpensions.com


If you haven’t started your pension project – start here!

We don’t need to remind you that the biggest pension change in a generation is almost upon us. The biggest employers in the UK have to start enrolling all their employees in a pension from October.

The supermarkets are probably the biggest employers in this group. So from October there’s a good chance that the checkout lady that asks you if you want help with your packing will have automatically joined the pension scheme.

Smaller employers have a bit more time. On the fact it many will have a couple of years or so to comply. But in real terms it’s only two year ends and two pay reviews. Time soon passes.

If you haven’t worked out when you have to comply then you really need to start looking at it now. The first stage is to work out how many employees you have as that dictates when you need to comply.

There’s plenty of guidance on The Pensions Regulator’s web site. You can get to it by clicking here

The all round good eggs at the law firm DLA Piper have also published the first in a series of updates on the new pension rules. The first one is all about assessing exactly who your workforce are for the new rules. You can read the update by clicking here.

If you’re ready to start your project and you need some guidance and support 44 Financial would be delighted to help. You can contact us here to arrange an initial consultation – at our expense.

Steve Clark

Director

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U-Turn on Planet Pensions

What a week its already been on planet pensions  And it’s still only Tuesday!

Yesterday in our blog post on the new pension rules we first got some idea that the government was going to delay the introduction for some employers. U Turn sign Flickr mag3737By the afternoon the Pensions Minister Steve Webb had confirmed the rumours. Smaller employers are, after all, going to be given a bit of breathing space.

Now this is the same Steve Webb that told a conference almost a month ago to the day that there was no intention of postponing the introduction of the changes. It probably goes to show how little we can read into what politicians say!

So where does this leave us. It all depends on size and whether you are a small or large employer. Size is subjective and we all know that one man’s large is another woman’s small.

As it stands here is what we know from the announcement from the Department for Work & Pensions.

If you employ less than 50 employees

You’ll also get some breathing space. We know that you’ll be given until after May 2015Clock Flickr Dee'lite Medium to comply. This is after the end of this Parliament. We’ll have to wait and see what happens at the next election. However, the government has stated that all firms will have to comply at some point.

If you employ between 50 and 2,999 employees

You’ll get some breathing space. Your staging date will change but we don’t know by how much yet. The DWP will issue more guidance in January 2012.

If you employ more than 3,000 employees

You are unaffected by yesterday’s U-Turn. Your staging date is still the same. The very largest employers have to start complying from October 2012.

What does it all mean for me?

Our research indicates that the majority of companies with less than 50 employees don’t even know yet about these new pension rules.

There’s evidence that more employers in the 50 to 3,000  know about the changes but only a small proportion have started any serious planning.

Clearly, if you are one of these employers you’ll benefit from the delay. What you shouldn’t do is simply stick your head in the sand hoping the whole thing will go away. It won’t.

The delay will allow you to start looking at the cost of compliance and what impact it’ll have on your  business income. You’ll also have a chance to look at what you already have in place. It’ll give you time to work out what you have to do.

All is not lost!

Don’t worry if you haven’t had a look at the new rules and how it’ll affect you.

We’re talking to a growing number of employers who are taking this opportunity to look at whether they are employing the right adviser to see them through this minefield.

If you’d like to arrange an initial meeting to find out more about our active benefits service please email us here.