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News - 15 August 2011

Reforms in Workplace Pensions: more regulations for employers.

Due to people living longer the government estimates that around seven million people are failing to save enough to meet their retirement aspirations.
The governments answer - 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.

The State Pension will be a foundation for retirement but most people will want to build up their own savings on top of this. To encourage more people to save in a private pension the government is planning to introduce workplace pension reforms from 2012.

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. Only one-man companies will be exempt, otherwise every employer who has workers in the UK will be required to enrol those workers in a pension scheme.

What are the costs?

Employers and employees alike will have to make compulsory contributions, introduced gradually over a five year period till 2017, totalling 8% - including tax relief- of the employee’s earnings. The Employer MUST contribute at least 3% of that.

Employers can use a scheme already in place, set up a new one or make use of the low cost pension scheme set up by the Government called NEST (National Employment Savings trust) www.nestpensions.org.uk

Lavinia Newman of ABDS says:

”If you don't have a workplace pension scheme you need to plan to set one up as this can take some time to implement, and you should start budgeting for the costs that will be involved. To prepare for these new regulations talk to your pension scheme provider, if you have one.”

If you need any help and advice on this or a similar matter don’t hesitate, contact Lavinia Newman, Stuart Coleman or Tonmoy Kumar NOW to discuss how ABDS can help in all your financial planning and business advice.

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

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