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News - 12 January 2012

Countdown to the pension reform - are you ready?

At present UK employers are not required to contribute to their employees’ pension schemes.

However, another set of regulations is set to fall on the shoulders of all employers. This time it’s a compulsory pension scheme for all employees.

This new pension’s law is due to be introduced over four years from October 2012. The largest employers (120,000 or more employees) will be forced to sign up first. Those who employ less than 50 workers will be required to take part in the scheme from a date sometime in 2014 to 2016. The exact date will depend on your PAYE reference number.

Employers and employees will be required to make contributions to the pension scheme totalling 8% of the workers earnings, including tax relief given on the employees' contributions. The employer must contribute at least 3% of the workers' earnings. This level of compulsory contributions will be imposed gradually over five years to 2017.

For the majority of people pensions remain the best method of saving for retirement. The tax relief available on contributions and the tax-exempt status of investments held within a pension combine to make pensions the finest tax-efficient savings vehicle available.

A recent survey (by the Personal Accounts Delivery Authority - Pada) reveals that the majority of SME owners are turning to accountants for pension advice ahead of the 2012 workplace pension reform.

The Pada survey tasked with setting up the National Employee Savings Trust (Nest) showed that 90% of UK firms plan to use external advice ahead of the reforms. Of small firms, with two to 49 employees, 67% will use accountants for external advice.

Lavinia Newman, Founder of ABDS says:

“At ABDS, we recognise that as an employer the need to plan early is of vital importance. From 2012, even if you employ just one person, you will be responsible for choosing a Qualifying Workplace Pension Scheme (QWPS) for your employees. It is therefore essential that you have a good understanding of what is required of you and the choices available.”

If you need any help and advice on the implications of pension schemes, contact Lavinia Newman, Stuart Coleman or Tonmoy Kumar to discuss how ABDS can help in all your financial planning.

ABDS Chartered Certified Accountants of Southampton.
Tel: 023 8083 6900  E-mail: abds@netaccountants.net

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