The Business Exchange Swindon & Wiltshire Edition 28: Dec/Jan 2016/17 | Page 24

PENSION REFORMS

NOW IS THE TIME TO TAKE ACTION OVER
AUTO ENROLMENT – OR PAY THE PRICE
Many people in business like certainty and stability to make them feel
confident and able to take risks. Surely no one in 2016 can say this
has been a year of certainty for those in business.
By Fiona Scott, Features Editor
We’ve seen Brexit and subsequent
discord in the EU and more latterly
we’ve seen the ‘Trump Factor’.
However the truth is, we simply don’t
know yet what the impact of these
things will truly be for business, large
or small.
There are other changes on the
horizon which, while they appear far
less dramatic, are more tangible and
definite. One of those is Automatic
Enrolment.
Having spoken to many business
people over recent months – some
know exactly what it is, but others
simply do not. They know it’s about
pensions, they know they have to face
it but their grasp of the detail is often
poor.
So for the sake of clarity Automatic

Enrolment is a Government initiative
to help more people ‘save for later life
through a pension scheme at work.'
The business community has been
given time to prepare for the changes
and there have been ‘staging dates’ for
various types of businesses.
The truth is we are all living longer,
drawing pensions for longer, we may
have chronic health conditions which
require treatment for longer and the
Government is saying it cannot afford
to pay through the welfare state for the
growing older population.
There is a general move to make
individuals save for their income in
retirement. As part of this overall
strategy, business is expected to take
on even more responsibility for its
employees’ pension pots.

Sandra Silk, of Sandra Silk
Bookkeeping and Business
Services, based in Old Sarum,
Salisbury, has already set up
many schemes for
small employers.
She said: “Setting up a scheme can be time
consuming and requires gathering payroll information
as well as deciding on a scheme and the type of
tax relief suitable for the employees. It requires
correspondence with employees, assessment of their
eligibility through the payroll and providing employee
information to the pension provider. This will be an
ongoing process at every payroll and every time a new
employee joins.”
Karen Reynolds, auto enrolment administrator with
Sandra Silk said: “While most employers have come
to us well in advance of their staging date, more
recently we have set up schemes for businesses that
have missed their staging date. This requires liaison
with The Pension Regulator in order to set up an
agreement to try to minimise the penalties.”

The biggest overall culture change
with this is that companies MUST
offer a pension scheme and all eligible
employees will be automatically entered
into it – unless they proactively opt out.
This must all be in place by October
2018 and it will be policed by The
Pensions Regulator or TPR. In fact, the
policing of the system has now begun
and it’s increasingly robust.
The TPR issued 576 escalating
penalty notices to employers that failed
to comply between July and September
this year, more than 15 times the
amount in the previous three months.
Employers who receive such a notice
will receive a penalty of between £50
and £10,000 per day, depending on
their size.
The number of fixed penalty notices

Dr Markas Gilmartin,
Partner of Epoch Wealth
Management, which supports
many people in Wiltshire said
any employee or employer
who is confused should take
independent financial advice. Individuals do need to
understand what the implications might be for their
future finances and planning.
He said: “For example, let’s say you earn £60,000
and have six children. You are a Higher Rate Tax Payer
( HRTP) and have lost your child benefit.
“If you contribute £10,000 gross to a pension
annually, you’ll get back 40% income tax, possibly
Employee and Employer National Insurance
Contributions (NICs) and recapture Child Benefit
which could equate to more than you contributed to
the pension in the first place.”
Contributing to a scheme could also help those
people who earn between £100,000 and £122,000 a
year and who have found their personal allowance is
gradually removed due to their earnings.
“The Personal Allowance (PA) erodes away when
you earn over £100,000. For every £2 you earn over
that amount, your PA reduces by £1. As the PA is
£11,000, incomes between £100k and £122k are the
most affected by this.
“As a pension contribution essentially “extends”
the Basic Rate / Higher Rate Tax threshold, those
earning in this bracket will effectively receive tax relief
at 60%. This figure becomes 75% if the employer
contributes the NIC savings as well,” he said.

given out, where employers are fined
£400, increased more than four times
on the previous quarter’s amount.
Between July and September 3,728
fixed penalty notices were issued
compared to 861 between April and
June.
The increase, according to the TPR,
comes as there was a 50 per cent
increase in employers reaching their
deadline to comply ie. their staging
date.
Reasons employers give for not
complying with the law have included
illness or being short-staffed. The TPR
says this is not ‘reasonable’.
The key experts to talk about
what’s involved in auto-enrolment are
Wiltshire’s accountants, book-keepers
and financial advisers.

Mike Lloyd of chartered
accountants Haines Watts
Swindon has some top tips for
business owners who are still
unsure of their responsibilities:
Start the process of planning early
Most employers start engaging with a financial
advisor a year before their staging date, to design a
solution to meet their ambitions and requirements.
Understand your responsibilities
As an employer, the weight of the auto enrolment
responsibilities sits with you, including communicating
with your workers, automatically enrolling the eligible
employees, selecting a suitable default investment and
informing the pensions Regulator of your decisions.
Remember why this is being introduced
A great employee benefits package can be the
difference in attracting and retaining high quality
workers, so remember the auto enrolment legislation
is a fantastic opportunity for your employees to plan
for their futures and take control of how and when
they chose to retire.
For employees there can be enormous benefits in
embracing an Automatic Enrolment scheme – or any
pension scheme - in terms of tax relief.

To find out more visit the TPR’s website at www.thepensionsregulator.gov.uk
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THE BUSINESS EXCHANGE 2016