Small business

Pensions auto enrollment

After ten years since it was first muted, automatic enrolment for employees into an employer sponsored pension scheme finally went live on 1st October 2012. There is perhaps the inclination to think that now the systems and processes are

in place we can relax. Indeed, NEST has been open for business and has had members since July last year –working with over 300 employers, including more than 100 large firms that have chosen to use NEST to meet their automatic enrolment duties. These include household name firms such as the BBC, BT, McDonalds and Travelodge.

But in reality, the hard work is only just beginning. Over the next five years, over 1.2 million employers and up to 11 million workers will be automatically enrolled into saving for a pension, many for the first time and as time goes on, the sheer numbers of employers facilitating arrangements means one on one support from the actual scheme will not necessarily be an option. During summer 2014, 25,000 employers will hit their ‘staging date’ – NEST alone expects to welcome about 5,000 employers during this period and while it is simply not practical to engage with them on an individual basis, NEST will provide support in a number of different ways. It can take up to 18 months to put everything in place to comply with the duties. While there’s no getting round the work employers have to do to get ready, NEST has been built with simplicity and ease of use very much in mind, from the initial set-up, to its award-winning investment strategy to managing the opt-out process.

NEST also offers delegated access, which lets employers appoint an IFA to set up and run aspects of the scheme on their behalf. By contacting us for an initial discussion or to request a meeting at your work place. You can find more about how Mark Hughes & Associates  are working with employers to ensure that they are both compliant and offering a suitable pension solution for their employees.

Automatic enrolment is both a challenge and an opportunity. The scale of the task at hand is great, but represents a once in a generation chance to foster a culture of saving for retirement in the UK, it should also be an opportunity for employers to add value to their employee propositions.

Financial planning for divorce

The festive season is now upon us.  While the extended holiday period is a great time to relax and catch up with friends and family, for some, it is a time when long festering problems can come to a head.

The average age of divorcees is increasing and the fastest growing group is those aged 60 +

This age group is more likely to have considerable assets and will need the help of a financial adviser to make sense of it all.  Whilst solicitors have legal expertise, independent financial advisers are finance experts. Where pensions are involved in a divorce case, the expertise of both is required to find the best solution for the client.

Solicitors often bring in a financial adviser to help with implementing a pension sharing order. Specific pensions qualifications are required to offer advice in this area and very few solicitors have those qualifications. For financial advisers this will normally be G60, AF3 or equivalent.

Opportunities can be lost if a financial adviser is not brought in until a relatively late stage. The solicitor may not find all the pension assets, may not get a fair valuation, or may choose the wrong pension plans to share.

Even if the eventual settlement does not involve a pensions sharing or attachment order, obtaining the fairest value of the pension assets is crucial.

The cleanest financial break following a divorce is to offset the value of the pension(s) against other matrimonial assets. This is usually the first option considered. However, a pension sharing order may allow both parties to retain some assets. It may also be the only way a non-earning spouse can build up any significant pension provision in their own right.

Divorce can also cause several future tax headaches, including the potential loss of tax credits, CGT and an IHT liability – dependent on your individual circumstances.

Consult your independent financial adviser to make sure you know the options available to you.

The Chancellor’s Autumn Statement

The Chancellor George Osborne has today given his Autumn Statement the government’s commitment to addressing its finances should be welcomed by the financial markets.

Below is a summary of the key announcements made today.

Economy and Government Spending

  • The Office for Budget Responsibility expects GDP to contract by 0.1% in 2012, significantly down from forecasts of 0.8% growth in March. The OBR then expects the UK economy to grow by 1.2% next year.
  • The government’s fiscal consolidation programme is to be extended by another year to 2017/2018.
  • The UK budget deficit is set to fall from 7.9% last year to 6.9% this year.
  • National debt will not begin falling until 2016-17, a year later than previously expected.
  • UK unemployment is expected to peak at 8.3%, lower than initially expected, and employment is expected to rise every year moving forward.

Taxes

  • There is to be no new tax on property (“mansion tax”).
  • 40% tax rate threshold will rise from £41,450 to £41,865 in 2014 and then £42,285 in 2015.
  • Corporation tax will be cut by another 1% in 2014, taking the rate to 21%.
  • Capital gains tax allowances will rise by 1% in 2015 to 11,100
  • Inheritance tax  allowances will rise by 1% in 2015 to £329,000
  • Tax free allowance raise is to rise by £235 to £9,440.
  • Planned 3p rise in fuel duty not just postponed, but cancelled.

Benefits and Pensions

  • Most working-age benefits to rise by 1% per year over next three years.
  • Child benefits are also to rise by 1% per year over two years from 2014.
  • Tax relief on the largest lifetime pensions reduced from £1.5m to £1.25m starting in 2014-15, the annual allowance will now be £40,000 rather than £50,000.

To discuss how this may affect your own circumstances as always please do not hesitate to contact us to schedule a meeting.

Too many people have too little pension savings.

Over a third of British adults, equating to 13.6m, do not have a pension, research from Baring Asset Management, claimed.

The investment management firm found that of this figure 1.4m people who are 55 and older do not have a pension in place.

While Barings is not surprised that a high proportion of people aged 18 to 24 do not have a pension, it found it worrying that 47 per cent of 25 to 34 year olds have not started saving into a pension.
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File your tax return on time

In the past as long as you paid your tax liabilities on time and cleared any self-assessment tax due by 31 January, no late filing penalties were due. Even if you failed to pay your tax on time, late filing penalties were capped at £100 or nil if you were due a tax refund.

The goal posts have moved!

The 2010-11 tax returns have to be filed by 31 October 2011 if you are filing a paper return, or 31 January 2012 if you are filing electronically. If you fail to meet these deadlines you face the following penalty regime, even if your tax payments are up-to-date.

Penalties incurred

  • One day late an initial penalty of £100.
  • Three months late a daily penalty of £10 per day up to a maximum of £900.
  • Six months late an additional £300 or 5% of any tax outstanding, whichever is the higher amount.
  • One year late a further £300 or 5% of any tax outstanding, whichever is the higher amount.

As you can see the minimum penalty for filing 6 months late is £1,300 even if all your tax due is paid on time or you are due a tax repayment.
If you have had a relaxed attitude to meeting the filing deadline in the past; you may like to reconsider your priorities for the filing of the 2011 return!

Small business tax disputes

Small businesses will be able to settle tax disputes with HM Revenue & Customs (HMRC) without having to go to a tribunal, under new plans unveiled today.

HMRC has launched a pilot scheme called Alternative Dispute Resolution (ADR) aimed at small and medium-sized enterprises (SMEs) which will allow them to resolve any tax issues resulting from an HMRC compliance check before a decision or assessment has been made.
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Competition for NEST before it even starts?

Danish-based rival to the National Employment Savings Trust (Nest) NOW: Pensions will carry a £1.50 a month administration charge and a single default fund, it has been announced.

Now Pensions is a low-cost, cautious, multi-employer and trust-based pensions scheme launched by Danish pension provider ATP to compete with government-backed Nest. Nest and NOW will go head-to-head competing for the lowest earners when auto-enrolment begins next November.

Under NOW’s scheme, members will be entered into a default fund combing three other funds: a managed diversified growth fund, a retirement protection fund and a cash protection fund. Charges will be £1.50 per month for administration and a 0.3% annual investment management charge

Morten Nilsson, chief executive of NOW: Pensions, said: ‘We believe auto-enrolment is a wake-up call to the UK pensions industry, and ATP’s experience in servicing virtually the entire Danish working population, 4.7 million members, and proven track record shows there are alternatives

‘We have been providing Denmark’s working population with stable, consistent returns over the past 45 years, no matter how volatile the economic climate, and we are confident we can do it here.’

Nest will charge 1.8% on each contribution and a 0.3% annual management charge.

On the face of it £1:50 per month may look like a low cost - but only if you are contributing more than £83.33 gross per month. What happens when contributions stop which is the best fund Nest or Now Pension. Who will advise employers and employees on the implications of their choices.

Business owners need to start forming relationships with IFAs to get help on the coming pensions decisions.