Auto Enrolment and Workplace Pensions

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Auto Enrolment and Workplace Pensions

This is the year of workplace pensions – or auto enrolment. It doesn’t help that there are these two terms attempting to address the same issue. All employers, however small have to provide staff (which may be a spouse) a pension.

Strangely, in reality the selection of the pension is very much the least of the problems as in essence all this needs to comply with rules, ensuring that everyone (all staff) are properly assessed and informed about the pension being made available and then automatically enrolled. The employer and employee will both contribute, under auto enrolment terms, employees will pay more than employers.

This is really all about processes and being able to demonstrate compliance, much like VAT or PAYE. We do not set up workplace pensions, but are advising all employers to get and use some rather clever software by AE in Box. This will help you meet the deadlines and avoid fines. This year hundreds of thousands of small firms will need to comply.

January Sales

The software keeps you up to date and requires a minimal outlay. The initial set up fee of £79+VAT is being reduced to £1+VAT this month…. A bit of a January sale. The normal monthly license costs £29+VAT but only begins 9 months prior to your staging date. You will need to insert the promotional code at the online ordering stage which is: AEJANSALE

So it’s time to get cracking….

Please see our dedicated webpage for more information about this.

Here’s a good little video, (not by AE in a Box) but one of the better ones that I have come across.

…and one from AE in a Box

Dominic Thomas
Solomons IFA

You can read more articles about Pensions, Wealth Management, Retirement, Investments, Financial Planning and Estate Planning on my blog which gets updated every week. If you would like to talk to me about your personal wealth planning and how we can make you stay wealthier for longer then please get in touch by calling 08000 736 273 or email info@solomonsifa.co.uk

Auto Enrolment and Workplace PensionsDominic2023-12-01T12:19:37+00:00

Auto Enrolment – the rising tide

Auto enrolment pretty much effects everyone that isn’t yet retired. In a nutshell, having faffed around with pensions for the last 30 years the Government are now forcing employers to offer pensions to their staff. Employers will be required to contribute 3% of salary… employees 5%.

It’s true that this is not a compulsory pension. Employees can opt out. Employers cannot. There are hefty daily fines for those that fail to meet the deadline to implement their new, qualifying staff pension. Everyone has to comply…. not doing so isn’t an option.

All the UKs biggest businesses have now set up their auto enrolment pensions (also called workplace pensions…. helpful eh?). Just pause to think what an administrative nightmare this is… staff coming and going on a daily basis, all needing to comply else suffer fines. What a headache… thankfully technology will reduce the headache, but action still needs to be taken.

Now small and medium-sized firms are gradually reaching their “staging date” (start date) and there will be a massive number of them. Few realise that there are implications for contracts of employment and of course operating costs. However the biggest issue is technology as all staff need to have a working email address… presumably a work email address is easiest to monitor and demonstrate that information has been sent by the employer.

Pain Relief

Most financial advisers and Accountants aren’t getting too involved in auto enrolment. Frankly because the work can be expensive and small firms don’t want that. So we have found a solution – a bit of really good IT. Its called AE in a Box. It isn’t a pension. It’s a project management tool that ensures that you are compliant with the rules, makes it easy to set up a scheme and communicate with your staff.

If you are an employer (even if you run a Limited company with only one other Director or member of staff) you have to comply. So check out the very easy to use tool. It is a monthly license subscription (and you will need the ongoing support) as even those that opt out of your pension, will need to be opted back in every 3 years… the Government hope that inertia will ensure more people join pensions and thus build up their own resources, rather than relying solely on the State Pension… which is already over-stretched.

Are you an Employee?

Do your boss a favour, point them to our tool and earn some brownie points. I promise you that auto enrolment is a headache and leaving it until thousands of employers are trying to do the same thing at the same time will end in tears…. and fines. As an employer myself, I really value people who bring me solutions not problems.

Are you an Accountant?

The tool enables Accountants to assist in the process, providing and checking data. This will make your life much easier on so many levels when dealing with your small firm clients.

Click this link to get more information, its low-cost with a single sign up fee. The monthly fee isn’t taken until 6 months before your scheduled staging date. But whatever you do, now is the time to take action.

Dominic Thomas
Solomons IFA

Auto Enrolment – the rising tideDominic2023-12-01T12:19:57+00:00

Office Envy? 24 of the best offices

Office envy? 24 of the best offices

I came across this and thought that those of you that work in an office might be interested. It was put together by an insurance company (Unum) who specialise in protection and staff benefits. I loathe dull offices and have always wondered why, given that so many people have to spend so many hours in them, so few are designed with any sense of creativity.

Dominic Thomas
Solomons IFA

Office Envy? 24 of the best officesDominic2023-12-01T12:20:02+00:00

Taxing Reforms for Pensions

Taxing reforms for pensions

There has been considerable “chatter” about the prospect of pensions being reformed even further. In particular, the tax of pensions is very much up for debate, making the prospect of tax reforms for pensions a genuine possibility.

In brief the Chancellor has already made huge changes to the pension system, enabling a pension to be taken as a lump sum or as income without any requirement to buy an annuity. In addition, a pension can now be easily passed on to beneficiaries of your estate, rather than ceasing when you do.

Tax Overpayments

The new freedoms have already and will continue to mean that some people don’t do their sums properly and end up paying too much tax – unnecessarily, which of course is a good thing if you run HM Treasury… every little helps and all that.

In very simple terms, most people will currently find that whatever the size of their pension pot, they can take 25% of it as tax-free cash (these days “we” call it a pension commencement lump sum – or PCLS). The rest is taxed as income.

Reforming tax relief

At the moment, anyone that pays into a pension gets tax relief – either at 20%, 40% or even 45% depending on your rate of tax. Everyone gets 20% (from age 0 to 75). So an investment of £1000 actually costs £800 if you are a nil rate or basic rate taxpayer. If you pay more than 20% tax, you get to claim the balance back via your tax returns.

The Chancellor is reviewing this, because it costs the country a lot of money. The main problem being that employers make most of pension contributions each year and do so in part because it is treated as a deductible cost. If this were considerably altered, then most employers are likely to reduce or even stop (bar the minimum requirements of auto enrolment) their contributions. This would result in smaller pensions in retirement…

So he could simply reduce tax relief to a lower amount, in essence he has done this already for anyone earning over £150,00, who have their annual allowance restricted to just £10,000 (less than an ISA) if they earn over £250,000.

Tax relief provided in 2013/14 amounted to £34.3bn, whereas the tax on pensions generated £13.1bn a “cost” to the UK of £21.2bn. Most of which (2/3rds) is reclaimed by higher rate taxpayers… those paying 40% or more.

Shrinking the Pot

He has also reduced the amount that can be held in a pension (the Lifetime Allowance) which is set to reduce again from £1.25m to £1m next April. Anything above this will be subject to an excess tax charge of 55% as things stand at present. That’s what I call easy money for the Treasury and there isn’t that much that you can do about it, other than applying for protection where relevant.

Changing the Sweetener

Another option would be to make pensions tax-free in retirement instead of taxable. Whilst this sounds all well and good, the reality is that who would honestly trust any future Government not to change the rules later, when they realise that they need the income to be taxed.

Simplicity Seems Dead

I am of the opinion that pensions are going to change, how much and when, we simply do not know. However the Government wants to be seen not to help the “rich” which seems to include people paying 40% tax and everyone paying 45% tax. It would include anyone in the State Sector that has built up a long career – doctors, teachers, police, civil servants – all of whom seem to be the current “cat to kick”. It certainly includes anyone that has pension funds worth £1m or more. Though I would argue that £1m in a pension pot isn’t that huge (yes I know its relative) but in practice that provides at £40,000 a year income… not enough to pay higher rate tax. The worst case to my mind would be to create a “before and after” system – which we have had before, which only makes life more complicated.

If I were Chancellor?

People need an incentive to save for the long-term. I would abolish the Lifetime Allowance making all current and previous protections irrelevant. I would restrict tax relief to a % of salary, perhaps providing it directly as a 5% tax cut, say 20% tax becoming 15% if payments are made to a pension. That way HM Treasury collect taxes, people are incentivized to save and earn. I would scrap rules that enable people to pay into pensions for children, which is essentially something that only the wealthy can do, so that pensions are only for those aged 18. However I would continue to tax pension income as income…

Sadly, for younger generations the prospects of good pensions looks fragile… of course there is the prospect of the solution as outlined in Logan’s Run….. there’s just one catch..

Dominic Thomas
Solomons IFA

Taxing Reforms for PensionsDominic2023-12-01T12:20:08+00:00

Are You Safely Connected?

You are online and connected, so in the interests of providing you with some useful information about the online world, I thought I’d share a podcast (and video) that I listened to recently. This is taken from a really useful free resource website called “I Love Marketing” which is run by Joe Polish and Dean Jackson. I know that marketing isn’t everyone’s thing… but don’t forget that I run a small business and also work with many clients that run small (and large) businesses… and these guys have some really good ways of helping understand marketing, so that we all waste less time wasting each other’s time and get to what we all actually want (or need). As someone that did a Business Studies Degree with a specialism in Marketing, albeit many years ago, I can genuinely say that these guys provide information that can be implemented – its practical and it works.

Anyway, episode 189 of the I Love Marketing podcast or the video (here) is really worth spending your time. I tend to listen to podcasts at 1.5x speed, which saves some time and remains clear. Joe interviews Marc Goodman, a guy with a new book (yes ok, something to promote) all about the near future of technology. We think we’ve seen an explosion of things to save time, learn and so on… online, but he argues its nothing to what is coming… and with it there is a price – the need for much better understanding of security and the possible flaws in your own technology at home or work, which are exposing you to possible crime. The podcast or video is a reasonable length, but well worth your time.

Of course if you run a business or are in a marketing role, then I’d certainly suggest you check out Joe and Dean’s website and podcasts. They are an engaging pair with a wealth of great ideas and invaluable experience. The podcast can be found on itunes here. I’ve been listening to I Love Marketing for some time and hope that by sharing this you, if you are a marketeer or business owner, also get some really useful ideas from it. You can check out Joe’s bio page here and Dean Jackson here.

Dominic Thomas

Are You Safely Connected?Dominic2023-12-01T12:40:06+00:00

Pension Timebomb

Ok its April 1st, but this isn’t an April Fools Day joke…. this is data from the Policy Exchange, founded in 2002 to help contribute the national thinking about society. I don’t know if it is the case, but it would appear that the Coalition Government had a look at this before deciding to introduce the pension rules that come into effect next week. However if you are someone still saving for a pension or an employer, the findings are not great reading, with both needng to contribute rather more to pensions. Clicking on the graphic should make it larger.

by policyexchange.

Dominic Thomas

Pension TimebombDominic2023-12-01T12:40:03+00:00

Auto Enrolment Fines – Workplace Pensions

As expected, the pensions regulator is taking auto enrolment (workplace pensions) rather more seriously than it took stakeholder pensions. Employers were warned about the prospect of fines and as the number of firms that should have started their pensions has multiplied, so have the fines. This is unlikely to alter as the momentum increases. This year medium sized and some small firms will be expected to comply with the rules. 166 penalty notices were issued in the last quarter of 2014 and over 1,100 compliance warning notices sent to firms.

Avoid the Fines

Employers need to get on with their auto enrolment compliance. In practice this is a project management exercise rather than about finding a good pension. As a result I advise employers and Accountants to use the very low cost software from AE in a Box. It enables you to fully comply in time and avoid fines. Importantly it is an ongoing project – much like PAYE is an ongoing project, so data and processes need to be adhered to strictly.

AE in a Box

AE in a Box is very inexpensive, £79+VAT to set up and then £29+VAT a month thereafter. The monthly subscription will only begin 6 months prior to your staging date. I would urge you to consider this bit of kit. It isn’t a financial product, its a tool to help you do the job yourself, cost-effectively rather than getting a more expensive planner like myself involved.

Dominic Thomas

Auto Enrolment Fines – Workplace PensionsDominic2023-12-01T12:39:55+00:00

Financial Equality

Its Financial Planning week 2014 an opportunity to get some information about what financial planning is all about, however sometimes, this can feel beyond the means of many “ordinary people” who continue to struggle just to get fair pay, let alone a good retirement and financial plan. It doesn’t take an investigative genius to work out that there are many inequalities in the world. There are more poor today than there ever have been, yet there is also more wealth. Many would say that education is the best long-term way of relieving poverty, helping nations and individuals to become adept at self-reliance and adding value to the lives of others and/or wider society. Good education means different things to different people, to my mind it is the ability to open one’s mind to challenge the way things are, whilst holding a knowledge of how they came about. So depriving anyone of education is essentially a deliberate attempt to maintain the status quo without asking the question “how could things be better?”

Made in Dagenham

Whatever your political beliefs, a new musical worth seeing has arrived in the West End. “Made in Dagenham” is the musical adaptation of the 2010 film by the same name. This is the story of a group of women working at the Ford plant in Dagenham in 1968, who had their pay unfairly recategorised as “unskilled”. The musical frames the resulting struggle in the context of a Britain that is thwarted by strikes and general political incompetence. Whilst some might see this as a political ideology, its rather larger and more important – in that the actions of the day, ushered in the prospect of equal pay for women. A natural and one would have thought, obvious progression of suffrage.

Sadly, emancipation in finance has still a long way to travel. It would seem that many women are less financially prepared than men. I find myself treating the results of the surveys and results on this topic with some degree of scepticism. For starters, many women earn far less than men, many women “have less time” because life is not simply about a 9-5 series of tasks that many men would still appear to think it is, something that is also touched upon in the musical. So is it any wonder that many don’t have time to plan their finances or give them much thought, particularly when they are often simply trying to get by. So with that said, the Scottish Widows 2014 Women and Pensions report was published recently. Their data suggests that the average man saves £298 a month towards retirement and the average woman saves £206 (about 30% less). The report states that 78% of women don’t know how much they need to save for a comfortable retirement. I might suggest that this is probably on the low side and in practice I doubt that there is little difference between men and women on this point (not knowing how much is enough).

So, whilst the lyrics are possibly a little … fruity, the songs and sentiment are a worthy education and a timely reminder, that men need to proactively support equality, not prevent it. Like it or not, this is an issue for us all and bringing about change, begins at home and in your own workplace.. perhaps you could start with some background research by a trip to the West End to see this great new musical, with a fantastic set, music by David Arnold and Gemma Arterton in the leading role… they may just get you to stand up…

Dominic Thomas

Financial EqualityDominic2023-12-01T12:39:40+00:00

Fair pay… it all adds up

Fair Pay… it all adds up

If you follow my blog, you will know that I enjoy the arts. A theme that seems to have been gently simmering in the West End has been that of fair pay and protest. There’s nothing new about these issues, perhaps just a regular and frequent part of the human experience, however I wonder whether this also reflects a sense of unrest and unfairness about the current economic world in which we all live.

In the summer I saw The Pajama Game, which is an old 1950’s musical, one with which I have a personal connection as I was in a production of it at school, so there was a sense of reminiscence. The musical (by Richard Adler and Jerry Ross) isn’t that well known but has a few decent tunes. It was largely brought more exposure due to Doris Day in the 1957 film version. The setting is a clothing factory called “Sleep Tite”. There is a dispute between “workforce” and “management” involving pay, throw in a little romance requiring a crossing of lines and you have a recipe with some dramatic tension. 1395144469-image

The political aspect of the story revolves around increasing pay, which the workers demand and the management attempts to deflect. The hourly wage rise demanded is an extra 7 1/2 cents (dating the story) and revealing its original source, the 1953 book “Seven and a half cents” by George Abbot and Richard Bissell. This provides the lyrics for one of the main “numbers” which is one of those very rare songs that includes mathematical calculations.

“With a pencil and a pad I figured it out!
Seven and a half cents doesn’t buy a hell of a lot,
Seven and a half cents doesn’t mean a thing!
But give it to me every hour,
Forty hours every week,
And that’s enough for me to be living like a king!”

The song illustrates how a small difference can multiply significantly over time, however as this is financial planning week, I ought to point out a flaw in the logic of the song, that of forgetting about inflation. The maths is “simple” in that is merely adds (or multiplies) it doesn’t calculate who this compounds over time but instead reveals what seven and a half cents extra, every hour, 40 hours every week provides – over 5 years $852.74 over 10 years $1705.48 and 20 years $3,411.96.That said, having checked the maths there are slight errors in these sums.

Presentation is everything and within the financial services world and I don’t want to make this a long post, but suffice to say that if inflation was 3% a year the sums would be rather different over 5 years $905.46, 10 years $1,955.14 and 20 years $4,582.68.The longer that income is decoupled from inflation, the less well off you are. The other point being that future money can sound like a lot more than it is in practice, or in reality – real (inflation adjusted) terms.

Today of course we have a public sector funding freeze, where despite inflation, salaries have remained at the same level. If this were to persist for many years, there would be a real sense of loss. As inflation is currently only 1.3% that means that over the last 12 months £1,000 is now worth £987, to stay at the same level of pay, income would need to rise by 1.3% to £1,013. Hence why many are getting somewhat agitated and expressing the view that their salaries are falling in real terms (they are).

The Pajama Game has now concluded its run in London. The unrest about pay increases has not…

Dominic Thomas

Fair pay… it all adds upDominic2023-12-01T12:39:39+00:00

A morning of auto enrolment

Today I spent the entire morning hidden away in the company of auto enrolment experts…. Its almost as though there is a theme building in this blog. Anyway, there were some great speakers and presentations, thankfully nothing was terribly surprising, other than perhaps the candour. As I had outlined here previously, the real issues have little to do with pensions and everything to do with compliant processes and systems that work.

34 and counting…

Reliance on a payroll system may be misplaced (its not easy to tell) but one major pension provider outlined that there are 34 data fields required for each employee…can you think of 34 questions about your staff? Name, date of birth, NI number, salary, home address, email address, contribution rate…. And so on. There was no denying the importance of accurate and correct data and of course this needs proper checking and policing for security – involving your IT department or if you don’t have one… your IT person/supplier etc.

Concern about loss of pension allowance protection

My only real concern was in relation to lifetime allowance protection, after all payments into a new pension (such as auto enrolment) will, (under current rules) undo any pension protection. The thing is that employers are not permitted to advise staff not to join the auto enrolment scheme and indeed most financial advisers aren’t either due to a quirk in the rules which prevents anyone that does not hold G60 (an exam that can no longer be taken) from advising people not to join an employers pension. Yes, its daft and everyone seems to be relying on HMRC providing some sort of exemption or providing the advice themselves…. Yet here we are with lots of firms with auto enrolment already under way… now call me a cynic, but waiting for the right thing to be done seems unrealistic and naïve.

Good employer?

One of the good things about today was that many, well most, employers are actually pretty keen on providing staff with a pension. Yes there are some that seem to think it won’t happen (good luck with the fines) and as one commentator put it, there will be 100% take up, because 100% of employers have to offer and run a scheme, some (about 10%) of the staff will opt out, but even if 99% opted out, the rules must still be adhered to. So… better get on with it. Here is a little video about AE from a SME… yes the jargon is now in full flow! thanks to Standard Life.

Dominic Thomas: Solomons IFA

A morning of auto enrolmentDominic2023-12-01T12:38:58+00:00

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