COMPULSORY PENSION JUST AROUND THE CORNER!

If you are an employee or an employer, this is vital data that affects you. Over the next few years all employers will have to set up a mandatory pension for their employees into which both employer and employee must contribute. This comes from The Pensions Act 2008 Section 3(2) which states: “The employers must make prescribed arrangements by which the jobholder become an active member of an automatic enrolment scheme…” The only exception would be a one man limited company with the director being the only employee. There are estimated to be 1.2 million employers and, of these, some 86% (over 1 million) have no pension scheme for their employees. The penalties for non-compliance can be severe starting with a Fixed Penalty of £400 and rising up to “imprisonment for a term not exceeding two years or to a fine, or both”.


This compulsory pension is being phased in – with the employers with the highest number of employees being required to start first. Each company will have its own “Staging Date”, i.e. the date by which it needs to action the setting up of the compulsory pension. If you are an employer, you can find out your Staging Date by going on line to www.thepensionsregulator.gov.uk/employers/staging The level of contribution starts at 1% of salary by employer and 1% by employee. From 2017 this goes up to 2% by employer and 3% by employee. And by 2018 it reaches its final level of 3% of salary paid in by the employer and 5% by the employee.

Not only will this represent an additional expense by employers who have no current pension scheme, it will also require a significant amount of time to carry out all of the actions required. While those with less than 30 employees will not reach their Staging Dates until 2016/2017. It is estimated that all employers need to take action at least 12 months before their Staging Date. There will be 10s of thousands of companies with the same staging dates and those who do not prepare in advance may find that there is little or no help available to them, with the help available having already been taken up by other companies who have acted earlier. Effective software will be the key to a successful operating basis for a compulsory works pension.

A HIGHER STATE PENSION ON THE WAY?

If you are doing some pension planning, it is worth knowing that the Government is proposing to bring in a flat rate State Pension from April 2017 which would be the equivalent to £148.00 per week now. Currently the Basic State Pension is £107.45 per week. The new flat rate pension is intended to simplify the system. It is intended to improve the "safety net" for British pensions, but it should only really be seen as part of an overall retirement plan.

Review your mortgage arrangements

If you are on your lender’s Standard Variable Rate and paying more than 4.5%, find out what other options your lender can offer and then contact us. We can look at what is available in the marketplace so you have some basis of comparison. It can save you thousands of pounds over the term of the mortgage.

Review your pensions

You may have pension pots in various places from previous employments or pension savings arrangements. Find out what the fund values are and what funds you are invested in. You can then look squarely at how much pension income you are likely to have available in your later years and act accordingly. We will be happy to help you work out what these might add up to eventually. Also, make sure that your various pension providers have your current address so they do not lose track of you.

Review your life assurance arrangements

Pull out the documents and see how much you are covered for and for how long. You may find a policy is coming to its end and you can ask us to check the cost to ensure you are not overpaying for your life assurance. The Uni-Sex insurance directive that came into force at the end of 2012 has brought about various changes in the costs of life assurance – some good and some bad!

Be aware of your Tax Allowances

Be aware of your Tax Allowances and take advantage of them and ensure your spouse does so as well - if you are married.


                                                       2012/13                                          2013/14

Personal Tax Allowance                   £8,105                                           £9,440

For those aged 65/74                       £10,500                                         £10,500 (no change)

For those 75 and over                      £10,660                                         £10,660 (no change)


Note: The Age Related Allowances above are only available to those whose total income is less than £25,400 in the current Tax Year and £26,100 in the new Tax Year.

The end of the Tax Year

We are approaching the end of the Tax Year and it is a good time to ensure we are all taking advantage of all of the tax allowances available, including the Personal Tax Allowance, the ISA (Individual Savings Account) allowance, the Capital Gains Tax allowance, etc.


Use your Capital Gains Tax Allowance if you have investments that have gone up in value. You can realise tax-free profits of up to £10,600. As with your ISA allowance, you cannot carry this forward. Use it or lose it!

Maximise your pension contributions where possible. In the current Tax Year you can put a maximum of £50,000 into your pension, and even more if you have not used up your pension payment allowance in the preceding three years. In the new Tax Year this maximum reduces to £40,000. We would be pleased to assist.