36 . Glasgow Business January/February 2014
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How much employers must contribute Most pension arrangements used for auto-enrolment will be defined contribution or money purchase schemes. Te Government has set minimum contribution levels for employers and workers, but these can be phased. Te contributions for defined contribution schemes are: »October 2012 to September 2017 – total: 2 per cent/employer contribution: 1 per cent »October 2017 to September 2018 – total: 5 per cent/employer contribution: 2 per cent »October 2018 onwards – total: 8 per cent/ employer contribution: 3 per cent. Rather than defined contribution, a
company may operate a defined benefit or hybrid pension scheme (also known as ‘final salary’ or ‘career average’ schemes). Employers and workers can’t increase the
contributions they pay into these schemes, so there are alternative arrangements. If your business has one of these schemes, you don’t have to automatically enrol your employees until 30 September 2017.
NEST
One of the final stages for most small employers will be the selection of a suitable ‘qualifying’ pension scheme. Derek Blaik said: “To assist with this process, the Government has set up the
“Measures have been put in place to discourage employers from avoiding their responsibilities “
National Employment Savings Trust (NEST), designed with the new auto-enrolment rules in mind. It is a money purchase registered pension scheme, and the usual rules regarding tax relief on contributions apply. Te scheme also has a relatively low charging structure to make it more atractive to employees.”
What employers can’t do
Several measures have been put in place to discourage employers from avoiding their responsibilities on auto-enrolment. For example, companies cannot offer incentives to employees to opt out of their workplace pension or, during recruitment, imply that a candidate can only be employed if they opt out of their workplace pension. Equally, they’re not able to dismiss a worker because they stay in their workplace pension.
The Pensions Regulator
Te Pensions Regulator helps companies comply with the new law and will write to businesses before they need to start enrolling
employees to give them a ‘staging date’. Once firms have been notified of that date to enrol eligible workers, they can postpone automatic enrolment for up to three months. Tey can also use this ‘postponement period’ for newly eligible workers.
No complacency
Although employers with 49 workers or fewer won’t begin enrolling their workers until June 2015 – and companies established aſter April 2012 don’t have to start enrolling their employees until May 2017 – Derek Blaik warns against complacency. “Te aim for businesses affected by the auto-enrolment should be adequate preparation, and they should begin making arrangements well in advance of their prescribed staging date,” he said. “Assessing the relevant timescale and
determining the number of employees who are likely to qualify for auto-enrolment will help employers to gauge the likely financial impact. Given the range of options available, employers should consider whether they need to seek financial advice when it comes to selecting and seting up a suitable pension scheme. Advice may also be required to determine whether an existing pension scheme will comply with the new rules. “Tere is no doubt that the reforms create
challenges for small businesses, but taking the right preliminary steps at an early stage and seeking proper guidance should lessen their overall impact.”
More ways to grow funds for retirement
Apart from pensions, there are other ways to boost your funds for retirement. Two experts offered their view.
Alan Dick, of Forty Two Wealth Management said: “The first thing anyone should do is undertake proper financial planning. Think about when
you want to retire, what lifestyle you’d like, and how much that would cost. Work backwards and see how much you should be putting aside. When you know that, you can decide on the savings and investment products you need.
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