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 The Pensions act 2008 requires that from 2012 all appropriate employers will have to provide a qualifying workplace pension arrangement for all eligible staff. Eligible staff will be automatically enrolled into this workplace pension arrangement (unless they opt out). Employers will also be required to make a minimum contribution to the pension arrangement of their eligible staff which is likely to build up to 3% over the first few years of the scheme. This ‘auto-enrolment’ will increase the employer’s costs where no scheme is in place presently. The benefits of providing a pension scheme for employees are: Employees' contributions attract income tax relief. Employer's contributions qualify for corporation tax relief and do not attract National Insurance costs The investments of a pension scheme are largely tax free but nowadays the tax credit on dividends payable on shares held in a pension scheme cannot be reclaimed. Pensions are a tax-efficient way of increasing employee benefits and remuneration. Please Note... The maximum amount you can contribute to a pension plan, and on which you can receive tax relief, is 100% of your earnings or £3,600, whichever is greater. This is capped at the Annual Allowance, currently £50,000. You can pay more than this but there will be no tax relief on the excess. Contributions can also be paid by an employer and these count towards the Annual Allowance. Contributions in excess of the Annual Allowance can be made but will be subject to a tax charge at your marginal tax rate.
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