The rules are changing and all employers will have to provide a pension arrangement for their employees by 2017.
PENSIONS & AUTO-ENROLMENT
Although some employers are not currently required to provide a pension scheme for its employees, introducing one now can help retain existing and recruit new staff.
The Pensions act 2008 requires that from October 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.
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 £40,000, however, individuals earning in excess of £210,000 per annum may be subject to a reduced Annual Allowance of £10,000. For those earning between £150,000 and £210,000 a reduced Annual Allowance is applicable on a tapered basis. You can pay more than this amount, subject to your residual allowances from the previous three tax years. Contributions can also be paid by an employer and these count towards the Annual Allowance. Further details will be provided during our discussions.
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