Category Archives: pensions

Helping employers identify a pension scheme for automatic enrolment

The Pensions Regulator (TPR) has opened consultation on a proposal to publish a list of pension schemes that are available to any employer, regardless of the number or workers the employer has or their levels of pay.

According to research carried out by the Department for Work and Pensions 48% of small and 79% of micro employers currently have no pension scheme and will have to choose a new one as they prepare for automatic enrolment.

TPR state they are ‘aware of 30-40 providers who offer a scheme for automatic enrolment. Of these, a much smaller number of schemes have indicated they will not reject employers on the basis of size or low value. Even fewer schemes have indicated they will accept all employers who approach them.’

To read more about this issue and the consultation visit the link below.

Internet link: thepensionsregulator.gov.uk

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Pensions Regulator uses formal powers over Auto Enrolment

The Pensions Regulator (TPR) has issued the first quarterly bulletin which details how many times it has needed to use its formal powers to ensure employers comply with their automatic enrolment duties.

The first of the new quarterly bulletins shows the regulator had used its powers on 23 occasions up until the end of June this year. The powers listed include the ability to carry out inspections and to issue statutory notices including fixed penalty and escalating fines.

Executive director of automatic enrolment Charles Counsell said:

‘Employers and the pensions industry are understandably interested to know how and when we use our powers. To date the vast majority of employers are complying with their new workplace pension duties without the regulator needing to use our enforcement powers.’

‘I believe this is a testament to the success of our proportionate, risk-based approach to compliance and enforcement. We target our resources where they will maximise compliance and work with employers to help them comply with their duties.’

‘We have provided the tools and assistance that large and medium employers need to ensure millions of workers didn’t miss out on the pension contributions they are entitled to. On a small number of occasions, when our intervention has not resulted in the required outcome, we have used our powers to help to ensure employers comply with their duties.’

For general guidance on employers auto enrolment duties see TPR website. If you would like specific guidance, help or advice on how to deal with your auto enrolment obligations please do get in touch.

Internet link: Bulletin

Budget 2014

The Chancellor delivered his Budget Speech on Wednesday 19 March and set the scene for the announcements stating that:

 ‘If you’re a maker, a doer or a saver: this Budget is for you.’

Main Budget tax proposals:

  • The starting rate band for savings will be increased from April 2015 and the current 10% tax rate reduced to nil.
  • Individual Savings Accounts (ISAs) are to be simplified by merging the cash and stocks ISAs together with a significant increase in the investment limit from 1 July 2014.
  • Radical changes are to be made to the pensions regime including removing the restrictions on access to pension pots so there will no longer be a requirement to buy an annuity.
  • The Annual Investment Allowance is to be doubled to £500,000 until 31 December 2015.
  • An increase will be made in the R&D tax credit available to loss making SMEs to 14.5%.

We have included articles on these main proposals. However please do get in touch if you would like further information on Budget announcements.

Internet link: Gov.uk website

DWP issue guidance on new Class 3A NIC

The Government wants to offer help to existing pensioners and people who reach State Pension age before 6 April 2016, when the single-tier pension is introduced, to give:

  • ‘people in the pre single tier population, who may have lost out because of the structure of the legacy second pension system, the opportunity to increase their state pension in retirement
  • hard pressed pensioners, especially those who rely on their capital to supplement their income, an opportunity to top up their pension in a way that will protect them from inflation and
  • people with small amounts of pension saving a secure way of achieving an income.’       

The Government intends to introduce Class 3A in October 2015 and the scheme will be open for a limited period. There will be two entitlement conditions:

  • contributors must have entitlement to a UK State Pension (either basic State Pension or additional State Pension) and
  • must reach State Pension age before 6 April 2016.

‘Prices will reflect the age an individual takes up Class 3A. This is a key component of an actuarially fair price. Prices will be lower for older pensioners simply because on average they will have a shorter life in retirement at the point they take up Class 3A. The Government intends to publish a list showing prices of a unit by age.   

Class 3A will not replace the existing Class 3…The Class 3A information products will make clear that individuals should consider making Class 3, contributions where that is possible, before taking up Class 3A. HMRC intend to identify applicants in that position and inform them of the option.

Each Class 3A contribution will result in the acquisition of a unit of extra pension which will increase the contributor’s additional State Pension by £1 a week up to a cap of potentially £25.’           

‘We estimate that around 7 million pensioners will have enough savings to pay the new National Insurance contribution.’

‘Class 3A will be set at an actuarially fair rate which means that over time the policy will be broadly cost neutral. This reflects the funding position of the single tier and means that today’s workers will not have to fund the policy.’

We will keep you informed of further announcements.

Internet link: Government publication

Autumn Statement

Earlier this month the Office for Budget Responsibility (OBR) published its updated forecast for the UK economy and Chancellor George Osborne responded to that forecast in a statement to the House of Commons later on that day. This statement was followed by the issue of draft legislation together with consultation documents

Some of the key new announcements made as part of the Autumn Statement are as follows:

  • the introduction from April 2015 of an exemption from employer NICs for employees under 21 on earnings paid up to the Upper Earnings Limit
  • allowing companies to claim tax relief on donations to Community Amateur Sports Clubs by extending Gift Aid
  • the introduction from October 2015 of a new class of voluntary NIC (Class 3A) that gives those who reach state Pension age before 6 April 2016 an opportunity to boost their Additional State Pension entitlement.

The link below gives access to the government information on these and other areas.

Please also refer to the separate articles in this newsletter on some specific announcements where further details are available.

However please do contact us if you would like further details on any announcements.

John Cridland, CBI Director-General has issued the CBI’s response to the statement some of which is reproduced below:

We have always advocated the dual approach of tackling the deficit and driving growth – the OBR forecasts confirm it is working. Let’s stick with what works.’

‘The pressure on the high street has been recognised; the 2% cap on business rates and discount for very small businesses are positive, as is the reoccupation relief.’

‘Abolishing a jobs tax on employing young people under 21 will make a real difference and help tackle the scourge of youth unemployment.’

‘But it was a missed opportunity not to support our hard-pressed energy intensive businesses which are also struggling with rising costs, and the package on housing supply could have been more ambitious.’

‘Alongside the positive measures to help the high street, including the 2% cap on rates, empty property incentive and £1,000 boost for smaller retailers, we need to see a review of the outmoded business rates system.’

“Reducing the cost of employing 18-20 year olds will help more young people find jobs when it comes into force in 2015. Job centres will have an important role to play and will need to work more effectively with businesses to ensure young people get the right advice.’

‘Businesses will now be looking for government action in the Budget and this has to include looking at the impact of the Carbon Price Floor. Shale gas will play a role in delivering a balanced energy mix, but we need action on all fronts to keep costs down and secure our future supply.’

Internet links: Autumn Statement CBI press release

Pension scheme charges consultation

Government consultation proposes to cap annual charges that are applied to pension schemes at between 0.75% and 1.0% a year.

While the average charge on new pension schemes is around 0.51% the Office of Fair Trading estimates that there are over 186,000 pension pots with £2.65bn assets that are subject to an annual charge of above 1%.

The government is also consulting on measures to increase transparency in the pensions sector and make it easier for employers to compare pension schemes.

Minister for Pensions Steve Webb said:

‘The government believes that enough is enough on charges. People need to know they are getting value for money when they save into a pension and not being ripped off by excessive charges. We are consulting on a cap on pension charges. A range of options will be on the table including an outright ban on all charges above 0.75% per year.’

With Pensions Auto Enrolment being rolled out to all employers please do get in touch if we can help you to get to grips with the obligations.

Internet links: Press release consultation

Pension ‘liberation’

The ICAEW have issued a warning that individuals are being approached by firms offering to help them ‘unlock’ their pensions or access them early. Some unscrupulous firms are using misleading information and in some cases offering personal loans or cash incentives to entice savers to cash in their pensions early. This is known as pension ‘liberation’. For further information use the link to the Pensions Regulator website below.

The ICAEW are warning that those taxpayers who decide to take the initiative themselves and access their pensions early will find that some or all of their hard earned pension savings may be at stake. This is because the normal rule is that you cannot generally access pension savings before you reach the age of 55 at the earliest.

Those opting for pension ‘liberation’ will generally be liable to pay a tax bill of more than half of their pension savings and may have to pay further tax penalties as well. Additionally, the provider usually imposes significant charges, sometimes up to 20%. The ICAEW website provides details of the potential tax liabilities and charges and also a link to report firms promoting pension ‘liberation’.

Please do get in touch if you would like further guidance in this area.

Internet links: ICAEW website Pensions Regulator action pack