The latest Clay Shaw Butler Money Matters column from the Carmarthenshire Herald
By Mark Jones, director of Carmarthen-based Clay Shaw Butler chartered accountants and business consultants.
Over the last two weeks in Money Matters we have put the spotlight on changes to pension schemes.
We have put particular focus on ‘pensions auto enrolment’.
The Government is placing greater responsibility and sometimes higher costs on employers.
Employers are/will be required to provide access to pension provision for their employees.
Here is the scenario for employers with less than 50 employees but are part of a larger PAYE scheme. For example, the company is part of a group of companies and the company has a shared scheme with other employers.
There are special rules for such employers.
An employer can find out the detailed staging date rules from www.thepensionsregulator.gov.uk.
Employers are required to write to all workers (except those aged under 16, or 75 and over) explaining what automatic enrolment into a workplace pension means for them.
There are different information requirements for each category of worker. For an eligible jobholder, the letter must include details of how the employee can opt out of the scheme if they wish. The letter must not, however, encourage the employee to opt out.
The Pensions Regulator has developed a set of letter templates to help you when writing to your employees.
As part of the automatic enrolment process, employers will need to make contributions to the pension scheme for eligible jobholders. In principle, contributions will be due from the staging date but it is possible to postpone automatic enrolment for some or all employees for a period of up to three months. This may, for example, be used to avoid calculation of contributions on part-period earnings.
All businesses will need to contribute at least 3% on the 'qualifying pensionable earnings' for eligible jobholders. However, to help employers adjust, compulsory contributions will be phased in, starting at 1% before eventually rising to 3%.
There will also be a total minimum contribution which will need to be paid by employees if the employer does not meet the total minimum contributions. If the employer only pays the employer's minimum contribution, employees' contributions will start at 1% of their salary, before eventually rising to 4%. An additional 1% in the form of tax relief will mean that there is a minimum 8% contribution rate.
Earnings cover cash elements of pay including overtime and bonuses (gross) but minimum contributions are not calculated on all the earnings. Contributions will be payable on earnings between the lower threshold of £5,824 and the higher threshold of £43,000 for 2016/17. The earnings between these amounts are called qualifying earnings. The thresholds are reviewed by the government each tax year.
If we do your payroll, then the team at Clay Shaw Butler can help you make these calculations and tell you the deductions from pay and the payments required to the pension scheme.
It is important to note that The Pensions Regulator was established to regulate work-based pensions.
An employer must complete the declaration of compliance within five months of the staging date. In essence the declaration of compliance process requires the employer to:
- confirm the correct auto enrolment procedures have been followed and
- provide various pieces of information such as the number of eligible jobholders enrolled.
- avoid or resolve potential disputes with employees
- help check or reconcile contributions made to the pension scheme.
Using the guidance employers can follow a step by step process, each step advising when each task should be completed and and how long it should take. The guidance also includes links to tools and resources to help employers meet their duties.
As you can see pensions automatic enrolment is not a straightforward business. If your business is in West Wales, please contact us at Clay Shaw Butler for help and advice. We can help you to manage the road to automatic enrolment and help you to comply with the requirements when you are in automatic enrolment.
You can find out more about money matters on the Clay Shaw Butler website (under our news for business section) -
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