Auto-enrolment pensions

[Jessica@WhiteFieldTax]

A big waste of my time..

T'was, if not always, often at least, thus - well meaning ideas that never worked out. The predecessor of this was companies having over 5 employees having to nominate, and offer, a stakeholder pension. £500 for an IFA to set it up, 9 times out of 10 no employee joined.

On the one hand its a ticking demographic time bomb, on the other hand our politicians and civil servants don't seem to think things through.

Also L&G charge £1000 annual management, and £1000 setup fees!

I'm beginning to wonder if these pensions providers have lobbied government to introduce them.

Problem is the fund management fees are capped at 0.5% or something equally low, and the institutions managing them have to cover their costs elsewhere. Economics.

Now, interesting thought: will a brave employer write a "pension management fee" into employee contracts as a deduction from pay? Interesting employment law issue, it would need to be contractual, but employers are going to react badly to being unpaid pensions administrators alongside being unpaid tax collectors.

Rant over!

[richy]

Hi Richy

I've not used them myself yet but I hear NEST are meant to be quite good as they have been setup to accommodate small pensions for Auto Enrollment. I believe you/your accountant has to do a lot of the paperwork though around the Auto Enrollment formalities and the actual assessments each month.

As a director I don't believe you can skip the formalities if you have to operate Auto Enrollment due to the fact you have another employee (you'd probably be exempt if you didn't).

Martin
Contratax Ltd

Hi Martin

Thanks for your reply. NEST is the one my accountant mentioned. I will check them out. They look great, as they charge employer nothing. Employee pays a small contribution charge. NEST are a non-profit government setup

I realised, if Employer is contributing 3% (of the employee gross pay) - this then means that Employers NI is also then due, so it will actually cost employers in the region of 3.3%!

I explained my employee, and he said he had no interest in contributing to a pension. Therefore my ltd co would basically be running a scheme, with the only employee wanting to opt-out of it. A big waste of my time..
Rich

[richy]

Also interested to hear any recommendations for fully qualified pension schemes. I checked L&G, but they seem to have a min of 10 employees.

Rich

Also L&G charge £1000 annual management, and £1000 setup fees!

I'm beginning to wonder if these pensions providers have lobbied government to introduce them.

[ContrataxLtd]

Also interested to hear any recommendations for fully qualified pension schemes. I checked L&G, but they seem to have a min of 10 employees.

Rich

Hi Richy

I've not used them myself yet but I hear NEST are meant to be quite good as they have been setup to accommodate small pensions for Auto Enrollment. I believe you/your accountant has to do a lot of the paperwork though around the Auto Enrollment formalities and the actual assessments each month.

As a director I don't believe you can skip the formalities if you have to operate Auto Enrollment due to the fact you have another employee (you'd probably be exempt if you didn't).

Martin
Contratax Ltd

[richy]

Also interested to hear any recommendations for fully qualified pension schemes. I checked L&G, but they seem to have a min of 10 employees.

Rich

[richy]

Hello Jessica
Many thanks for you reply with information.

Shopping around sounds good, and maybe moving the staging date forward to now to save changing arrangements at a later date

I wonder if you know, as director can I skip the process of enrolment/un-enrolment? My accountant said that paper trail was needed.. so its a pain if I have to click and submit paperwork, and then leave the scheme every 3 years...
Thanks Rich

[Jessica@WhiteFieldTax]

On the face of it, the two options you've given are possible, however if you ask the employee to go umbrella, think about who covers the umbrellas costs?

Another possibility, looking at the nub of your problem, is to stage (start auto enrollment) early - Bringing your staging date forward | The Pensions Regulator - subject to selecting a auto enrollment comparable scheme. You'll have to think whether this would mean your enrolling yourself as you are on the payroll as well?

The set up cost does look high; no reason why you have to use accountant, you could shop around or, indeed, do most of the setup yourself.

Generally (and I wait for the other accountants in here to post and tell me I'm in a minority) accountants are only starting now to think about strategies for working with clients, extent of services offered, and charges. Some accountants will see if as a profit centre, others something they want so nothing to do with, and yet more something they have to do for clients through gritted teeth but with the client picking up costs. Within that mix there are questions about subbing it out for clients, encouraging clients to find and use their own advisor (which many won't), etc.

[richy]

Hi Guys

As a ltd co, I have an additional PAYE employee (on hours based contract).

My accountant informs I need to look at setting up an auto-enrolled pension with 1%, 2% and then 3% statutory contributions. I am fine with doing this.. but its not till 2016 that it is needed.

So recently I got a small increase from client.. so I can give pension contributions to employee. The problem is that from 2014-2016 that would be as a personal pension.. or as auto-enrolled "qualifying scheme", after 2016 must be "qualifying scheme". The restriction of "qualifying scheme" is that employee must match the contributions.. or they can't be part of it. I don't mind contributing, so that is fine, and if employee doesn't want to.. then I suppose I am 3% better off.

I got quoted £1000+VAT for initial pension setup by accountant... seems high.

I am wondering what options are. e g.:

* Get employee to set up his own ltd co and then sub-contract work to that ltd co
* Get employee to change to be via an umbrella? (that would be that umbrella sorted out all pension stuff and didn't take up my time)

* something else.

Any comments or suggestions welcome.

Thanks - Rich