Pensions

• Your Pension

As owner-managers of your own business, you can choose to use your pension allowances (Currently £40,000 per annum in most cases) as a tax-efficient method of saving, especially now that dividends attract an extra 7.5% tax charge. As your tax advisers here at PJCO, we explain your options in a straightforward easy to understand way so that you can make an informed decision about your pension savings. We can put you in contact with Independent Financial Advisory firms for investment advice or self-investing pension platforms if you want to do this yourself but we do not give you direct investment advice.

Pension legislation has changed drastically over the last few years and now for some business owners, Pension saving is a very attractive tax option. If you want to look at the tax saving options available to you as an owner/manager then please get in contact.

There are simply routes to save money by reducing the cost of life insurance and key man insurance cover by obtaining a tax deduction within your company and we can point you towards a suitably qualified adviser should you wish to review these costs.

• Your Employee’s Pension

As well as considering your own pension provision as a business owner, every employer is now required to have a Workplace pension in place if they employ workers.

Most of our clients choose to let our Payroll Department deal with these Auto-enrolment duties, but if you choose to do this yourself we set out a summary of the current requirements:

Every employer has immediate workplace pension duties when they take on a worker.

• Employer Duties

When an employer takes on their first employee they have to consider their workplace pension duties as well as payroll and employment responsibilities and carry out the following duties:

i) Set up a Pension Scheme –
The Employer must put in place a Pension Scheme from day one even though the employees may not be automatically enrolled as workers can express a wish to opt-in, voluntarily.
In practice. as soon as the first employee is submitted to HMRC on an FPS, The Pensions Regulator (TPR) is notified and will send a duties start date letter to the new PAYE scheme.

ii) Nominate a point of contact –
When you receive this letter, nominate a point of contact using the code on the letter. This will ensure that TPR can keep in touch by e-mail as the new employer progresses through their duties. The point of contact can be a payroll agent.

iii) Declaration of compliance –
Within five months of the Work placed pensions start date, a new employer must complete a declaration of compliance that confirms to TPR that their duties have been met. This will include auto-enrolling all eligible workers and notifying other staff of their optional rights to join the qualifying pension scheme that the employer has chosen. We can complete the declaration of compliance as the employer’s payroll agent in stages as the duties are met, and then submit the final declaration by the deadline.

iv) Find out who Work placed pensions apply to –
Our work placed pension compliant payroll software offers an integrated facility to assess employees ( referred to as workers in the regulations) for auto-enrolment.

In employment law terms (and this is what matters for auto-enrolment) a worker is someone who is not in business on their own account (self-employed) and does not have to be offered work and be required to accept it as an employee must. So, whilst payroll records might be the right place to assess who needs to be auto-enrolled, as HMRC extend the definition of a worker, there is also a need to look at other people who may have been classed as self-employed in the past but are now deemed to be workers. There have been a number of recent tax cases in this area including Uber, Deliveroo and Pimlico Plumbers and we expect the rules to amend over the next few years.

Company directors are not classed as workers unless they have employment contracts (which is unusual). If the only person (or persons in the PAYE scheme) are directors without employment contracts there are no auto-enrolment duties. If a director does have an employment contract, there are only auto-enrolment duties once a second person joins the payroll with an employment contract. There is still a need to make a declaration of compliance for a PAYE scheme even if there are no employer duties because the only individuals involved are directors with no employment contracts.

v) Send formal Work Placed Pension Letters –
Whilst it might be optional to auto-enrol certain people, it is mandatory to explain to them what their options are. As an employer, you will need to send a letter within six weeks of an individual joining a particular category of workers. Once again Our Payroll department can do all of this for you but we list out the basic options below:

• Eligible jobholder:

Aged 22 to state pension age earning over £833 per month (£10,000 p.a.) who will be auto-enrolled into a qualifying workplace pension and needs to be informed of this within six weeks of the start of the pay period where this occurs.

• Non-eligible jobholder:

Aged 16-74 but earning £503 – £833 per month; or
Aged 16-21 or state pension age to 74 even if earning over £833 per month.
Both categories will be written to within six weeks of the start of the pay period where they enter that category, informing them that they can choose to join a qualifying workplace pension scheme if they complete an opt-in form.

• Entitled worker:

Aged 16-74 earning less than £503 per month. You need to write to them within six weeks of the start of the pay period where they enter this category informing them that they can voluntarily join a qualified pension scheme and make their own employee contributions.

vi) Need Extra time? –
As an employer, you can postpone auto-enrolling an eligible jobholder for between one day and three months. The worker has the right to override the postponement and insist on being auto-enrolled. You must issue a postponement letter within six weeks of the worker becoming eligible.

vii) What are the Employer & Employee rates? –
From April 2018 whilst there is no mandatory employee contribution, as long as the total contribution is made, the split is entirely at the employer’s choice.

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