Greengages Payroll Bureau

Pension Reform

sam — Mon, 14 May 2012 12:40:45 +0000

In 1901, there were 10 people working for every pensioner in the UK. By 2050, it is estimated that this will change to just two workers for every pensioner. With our increasingly ageing population, this will prove an impossible burden for those in work in 2050 unless radical steps are taken now.

Since 2001, employers with five or more relevant employees have had to offer a stakeholder pension scheme to their workers or provide another scheme of equivalent or better quality. It was hoped that this would fill the pensions ‘hole’ however, there was no compulsion for employees to join any offered schemes.

Our current Government have decided to proceed with the previous Governments’ plans on Pension Reform and therefore from October 2012 all eligible jobholders who are not already members of a qualifying pension scheme, would start to be automatically enrolled into a qualifying pension scheme.

A qualifying pension scheme could be the NEST scheme offered by the Government or any other scheme that is approved by the Government.

The principle behind auto-enrolment is that in stages between 2012 and 2016, all employers regardless of size will have an obligation to auto-enrol all eligible jobholders into a qualifying pension scheme.

An eligible jobholder, in the main, is defined as being aged between 22 and 75, works in Great Britain and has earnings at or above the PAYE threshold, currently £8105 per annum.

In addition to the employee pension contributions, the employer will also be required to make a contribution to each employees’ pension scheme. The NEST scheme has the benefit of having a low start to help ease the financial burden to employers with the minimum contribution from employers starting at 1% rising to a maximum of 3%. This will be in stages covering a period of 5 years. The minimum contributions for employees start at 1% rising to a maximum 5% by 2017.

Summary of Employer Responsibilities.

All employers will have to undertake the following at their Staging Date (or ‘start date’) and on a continuing basis.

· Offer a qualifying pension scheme

· Automatically enrol all existing eligible jobholders within one month of starting and auto-enrol all newly employed and newly eligible workers

· Provide information to workers to let them know they are being automatically enrolled and information concerning their auto-enrolment.

· Provide information to all workers who are not eligible on how they can voluntarily opt-in to pension savings. Some workers are eligible for pension contributions from the employer without having to make a contribution themselves. These workers will need to be identified and monitored for any changes to circumstances.

· Facilitate the means for jobholders to opt-out and make refunds to those who have opted-out. Job holders can stop pension saving at any time but only after they have been auto-enrolled.

· Administer opt-outs, cessations and refunds within the prescribed time periods.

· Around every 3 years, all jobholders who have opted-out must be re-enrolled back into the qualifying company scheme.

· Keep records for 6 years about jobholders and the pension scheme including all opt-out and opt-in notices.

HMRC will contact each employer at least 12 months prior to their ‘staging date’ providing full information. As a breather; the first Staging Dates for employers with less than 50 employees will not be until March 2014.

LEGALS

It is against the law for an employer to actively encourage an individual to opt-out, such as offering alternative benefits that are mutually exclusive of being a member of a pension scheme. The employer must not provide the jobholder with an opt-out form directly, unless the employer also administers its own pension scheme. For example, when providing the relevant information to an eligible jobholder who has just been auto-enrolled, an employer should not include an opt-out form as part of that information. The employer should only go as far as telling the jobholder from where they can obtain an opt-out form. The Pension Regulator can and will impose very heavy fines for anyone found to be in breach.

More detailed information on Pensions Reform can be found at http://www.thepensionsregulator.gov.uk/pensions-reform/detailed-guidance.asp

Tax Free Money for Directors

sam — Sun, 12 Feb 2012 08:41:06 +0000

As the director of your own limited company you are actually the employee too and it is worthwhile considering putting yourself on the payroll. All taxpayers have a tax free allowance of approximately £7,500 a year (for the year 2011-12) and my reliable accountant sources assure me that if you were to take this in dividends, it would be taken after the Corporation Tax has been calculated.
The figures work like this; to take a dividend of £7,500 your company would need to make around £9,400 in profits before tax. If you take the same £7,500 as a salary you would save over £1875 in tax this year. This is true for all directors of your company. Of course, it will depend on your profits for the year and your accountant is the best person to advise you on this and the need for you to be on PAYE.
There is another benefit to running a payroll for directors and that is the NI contributions. Even if your earnings are below the limits for deducting NI, you will still be credited for being ‘in the system’ however, I think most accountants would agree that it is worthwhile making some NI contributions.

N.I. numbers now on paper

sam — Tue, 24 Jan 2012 10:13:20 +0000

Since October 2010, HMRC have been phasing out the use of plastic National Insurance Number cards and from October 2011, any new or replacement National Insurance Numbers will be sent instead by way of a letter. Employers should now expect to see an employees’ N.I. number in either format. Individuals of course will need to keep the letter safe in the same manner as with the plastic cards. Personally, I prefer the card as I think a letter with this vital information is more likely to get lost or destroyed but I guess the government have to make savings somewhere other than just finding ingenious ways of taxing ‘Joe Public’.
If you have lost or don’t know your N.I. number you can request HMRC to send it to you by filling in the form Your National Insurance number at www.hmrc.gov.uk/forms/ca5403.pdf
Employers can trace N.I. numbers on behalf of their employees by filling in the form Employees National Insurance trace at www.hmrc.gov.uk/forms/ca6855.pdf
Both forms can be filled in on-screen then printed before signing and posting to HMRC.