Auto Enrolment and Workplace Pensions

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 Pensions2017-01-06T14:39:21+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

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

Taxing Reforms for Pensions2017-01-06T14:39:26+00:00

Lost your pension?

Lost your pension?

Many people have lost track with old pensions, frankly it is hardly surprising given the number of name changes, mergers and acquisitions of various pension companies over the last 40 years or so.  Perhaps you have lost your pension too.

Consider the various jobs that you have had over the years, however small, perhaps there is an old pension lurking somewhere in the midst of your curriculum vitae.

Pension evolution…. perhaps revolution

Pensions have improved dramatically over the years and almost unrecognisable from those I first understood over 20 years ago. The evolution continues and something that adviser firms like ourselves spend a lot of time researching and reviewing. Cheap is not always best, but then neither is the most expensive.

The media, consumer groups and various politicians have regularly made statements about the charges on pensions, some of which are accurate, some are not. However, I imagine you would like to know if your old style pension could be brought up to date.

Find your lost pension

The Pension Tracing Service (PTS) was set up to help find lost pensions. In essence everyone has a National Insurance number that is unique to them, this is the main tool used to search for lost old pensions. It is believed that there could around 50million dormant or lost pensions “in the system” by 2050 due to the growing number of small pensions (due to auto enrolment, or workplace pensions).

Once lost, now found

Last year the PTS was contacted over 145,000 times and we expect this to increase considerably. They aren’t always successful in tracing pensions, but last year managed to trace 87% of those believed to exist.

Regain control of your pension

So it would be advisable to check if you have any lost pensions and then check them (and any old pensions that you haven’t lost) to determine if they can be improved. I have put a free guide together about this, which I have called “Regaining Control of Your Pension”. You can download it for free (tell your friends and colleagues) simply by completing the online request below this item.

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

Lost your pension?2017-01-06T14:39:26+00:00

Pension Timebomb

Solomons-financial-advisor-wimbledon-blogger

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.

Help to Save: Defusing the pensions time bomb

Dominic Thomas
Pension Timebomb2017-01-06T14:39:29+00:00

Auto Enrolment Fines – Workplace Pensions

Solomons-financial-advisor-wimbledon-blogger

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 FinesAE in a Box

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 Pensions2017-01-06T14:39:30+00:00
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