A CHANGE IS GONNA COME Sam Cooke

Does Everyone Need to Be Enrolled? No… Sole Traders / Partnerships with no employees Business who use only “sub-contractors” Some “personal companies” (Director only businesses)

Director Only Business Exemption Available if the only people working in the company are:- You as a sole director; A number of directors, none of whom have an employment contract; A number of directors, only one of whom has an employment contract; Can also apply to “office holders”

What if Director Only Business has “Low Paid” Employees? “Low Paid” is currently anyone earning £10,000 or less Don’t need to enrol anyone Duty to employees to inform them of the right to “opt in” No scheme required until someone does

Exemption Application required if you receive a letter from The Pensions Regulator informing of staging date to and complete pre populated Must inform them if circumstances change as soon as possible

Already Offer A Scheme? Rules allow the use of existing scheme(s) provided they meet Qualifying Pension Scheme conditions Still need to offer Auto Enrolment to employees not in existing scheme(s) who meet qualifying criteria

Costs of Implementing Will be dependent upon:- Size of workforce; Existing provisions;

Potential Costs The contributions themselves Professional advice for establishing the schemes (plus ongoing) Changes required to existing processes Developing employee communication Administration burden…..employees opting in and out

How to Reduce the Costs of Contributions Reduction in existing employee benefits (employment contact permitting) Reduction in future pay rises Reduction in workforce/use of sub-contractors None of these are realistic, nor lead to a happy workforce……

…instead Salary Sacrifice Definition:- A contractual agreement between employer and employee Employees pay is reduced before he or she receives it Corresponding sum paid to pension scheme by employer:- Employee saves income tax; Both employee and employer save National Insurance; On the amount sacrificed.

Example Bob receives a gross salary of £40,000 p.a. He receives net in hand, £30,287. His employer pays National Insurance of £4,408 Under auto enrolment, once the phasing period is over, Bob will receive net in hand £28,687 His employer will pay National Insurance and pension contributions totalling £5,608 Bob would have a pension fund of £2,000. He cannot access this until at least age 55 Costs to Bob, cash flow reduction of £1,600 Cost to employer, actual £1,200

Example If Bob were to sacrifice, 5% of his salary he would receive net in hand £28,927 His employer will pay National Insurance and pension contributions totalling £5,272 Bob would have still have a pension fund of £2,000 Additional cash in hand to Bob by using salary sacrifice of £240 p.a. Saving to employer of £336 p.a. These savings are per employee These illustrations would allow employees to decide whether salary sacrifice or even opting out is preferable to them

What if We Want to Use Salary Sacrifice? Cannot make agreement to salary sacrifice a condition of Auto Enrolment Salary Sacrifice must be voluntary Auto enrolment is mandatory for the employer Ask each employee to agree to sacrifice BEFORE automatically enrolled (or eligible to opt in) Consider postponement if required We can assist in demonstrating the benefit to them

How Can We Help? Payroll Bureau to take away some of the administration burden Assurance that will be processed correctly Our software will be compatible with most pension schemes; many with automatic links Advising of amounts due Making salary sacrifice agreements with H M Revenue & Customs Liaising with employees over any concerns they have (subject to limits of our engagement)

What We Cannot Do Responsibility for compliance remains with the employer. We cannot establish or operate the scheme itself……. ….. but we know a man who can!

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Disclaimer The seminar material has been prepared for the benefit of attendees. It does not necessarily stand on its own and no responsibility for loss occasioned by any person acting or not acting as a result of this material can be accepted by Alnwick Accountants.