How Pension Changes Affect Everyone

In the past three years there have been dramatic changes to the way people save for their pensions in the UK and the role that employers have in helping them to build up a pension pot.

The process of setting up new workplace pension schemes, called auto enrolment, has been ongoing since 2012 and employers of all sizes, from major corporations down to individuals with nannies or carers have to comply.

This blog is a quick guide to your rights and responsibilities if you are an individual employer and just employ one person to help you.

What Is Auto Enrolment?

The government’s rationale for the auto enrolment pension scheme is to plug the gap in pension provision.

Between 2010 and 2012 the Office of National Statistics calculated that 45 percent of men and 49 percent of women in the UK had no private pension provision at all.

Large companies were the first employers who were required to provide auto enrolled workplace pensions for their staff.

Between 2012 and 2014, large, medium and smaller businesses were added to the roll out of auto enrolment, and now in 2015 individuals with single employees are also obliged to provide pension cover.

Do I Need To Contribute Towards My Nanny's Pension?

If you employ anyone over the age of 22 who is paid more than £10,000 you need to provide them with a pension. The Government has sent letters to those affected, but still, many people are unaware of their legal responsibilities.

Employers with 1-30 members of staff will go through the auto enrolment process over the next two years, and by October 2017 all employers will be expected to have made provision for their staff.

The amount that you will be obliged to pay in pension contributions for your employee(s) depends on the PAYE (pay as you earn) number that HMRC assigns to your employee(s).

What To Do

If you employ someone (a carer or nanny for example) you may need to take action.

The government’s regulations are backed up by fines and penalties, so it is important to understand your responsibilities and comply with them by the deadline.

You might already have received a letter with the start date for your first payment into an employee’s pension scheme, most employers are given 18 months notice from the start of the scheme.

If you are unsure about when you need to start making payments, you can check with the Pensions Regulator.

How Much?

Initially, you will need to contribute one percent of the employee’s qualifying income. The employee will have to contribute 0.8 percent of their income and the government will add and additional 0.2 percent through tax relief.

Your contribution will rise to two percent in the second year of payments, but the qualifying income is not the employee’s entire salary.

It is any earnings between £5,824 and £42,385, therefore, if you pay an employee £10,000, you will only have to pay a pension on £4176 (10,000 - 5,824), meaning that your contributions will be £41.76 in the first year and £83.52 thereafter.

Getting Help

Many people find the idea of organising pension payments for others daunting and difficult, but fortunately there are numerous payroll companies who, for a small charge, can organise pension payments. Even if you outsource the task of pensions payments to an agency, the cost will still be born by you.

For more information please do not hesitate to contact the team at Ward Williams Financial Services Ltd on 01932 830664 or by email on wwfs@wardwilliams.co.uk.

China’s Crash: How Will It Affect You?

They say that when China sneezes, the rest of the world catches a cold. So when China suffered the financial equivalent of a massive heart attack at the beginning of last week, the world’s financial markets duly went into full-scale panic mode. But what does this mean for your investments? 

Black Monday, as it was quickly dubbed, was the day when the myth of China’s invincibility crumbled. By the time trading was done, stocks were down 8.5% the biggest single day loss in eight years.  

The reverberations were felt all around the world. The Nikkei index fell by over 4% and the Dow Jones Index opened 1,000 points down. Oil hit a six-year low as commodities took a tumble. Approximately 73.74bn was wiped off the FTSE 100 Index.  China reacted by cutting interest rates in an attempt to boost the economy but to no avail. Stocks continued to fall as investors got rid of anything that had any connection with China. 

The question is: how worried should we be and how will this affect your own investments? Investors panicked around the world because their confidence in the underlying health of the international economy was shaken. A slowdown in one of the largest consumer economies in the world could be a signal of bad times ahead for the rest of us. 

But it is not all doom and gloom. Around the world the general prognosis for the world economy is pretty good. In the UK, growth is predicted to be 2.8% in 2015. Against all predictions, the Greek economy did not collapse, but was recently reported to have shown some growth. China itself may no longer be delivering double digit growth, but for an economy of its size, growth is still healthy. In April to June it reported 7% growth and while its figures are often greeted with scepticism, its overall economic condition is a long way from collapse.  

So, the short answer is that there is no need for anyone in the UK to panic. Daily values may fall, but in the long term you should not feel the effects as long as you follow the basic rules of diversification within the portfolio – namely do not over expose yourself to any single market, and don’t invest in only equities (stocks and shares). As long as you have bonds and cash within the portfolio these should cushion the blow.  

The crash may also have been alarming, but it is nothing truly out of the ordinary. Stock markets are cyclical with crashes such as these happening every seven to ten years. There have been big falls on the stock market before and there will be again. As long as you keep your head, the long term value of your investments should hold. 

In summary, then, the message is this: do not panic. Although it is easy to be swept up in the hysteria, as long as you stay true to basic common sense principles such as diversification, you should be fine. 

THE VALUE OF INVESTMENTS AND INCOME FROM THEM MAY GO DOWN.  YOU MAY NOT GET BACK THE ORIGINAL AMOUNT INVESTED.

For more information please do not hesitate to contact the team at Ward Williams Financial Services Ltd on 01932 830664 or by email on wwfs@wardwilliams.co.uk.

10 Things To Do To Get Your Finances Ship Shape

If you want to get your finances into good shape, how about taking a few minutes to look at them?  Making sure you have ticked off all the boxes in this 10-step check-list will help keep them looking good too.

1. Make a Will

If you have any assets at all and there is anybody in life you love more than the Inland Revenue, make a Will.  Even if you are young and single with no dependants, make a will.  If you do die unexpectedly, it can make life much easier for your loved ones. 

2. Life Insurance

If you have anyone who depends on you financially, then life insurance should probably be high on your agenda.  The bad news is that even young people can die unexpectedly.  The good news is that it is relatively unlikely so young people tend to get the best life insurance deals. 

Shop around to see what is on offer.

3. Start Saving into a Pension

It is never too soon to start saving into a pension.  Later, however, is still better than never.

Saving into a pension has two big plus points.  Firstly contributions attract tax relief.  Secondly, those in workplace pensions can get additional contributions from their employer. 

The fact that pensions have these benefits means it may be worth contributing to them even if you are still clearing debts.

4. Clear high-interest debts

Mortgages, car loans and student loans are designed to be paid off over the long term.  These types of loans tend to have relatively low interest rates. 

Personal loans and credit card or store card debt is an entirely different matter.  This kind of debt tends to be very expensive.  Therefore it is generally best to pay it off as quickly as possible.  If your credit rating is good, you may be able to get a 0% interest balance-transfer deal.  This can help to freeze the amount of the debt instead of having interest added every month.  Ideally you should pay off the debt before the deal comes to an end.

5. Look at Moving Your Mortgage

A mortgage is a significant expenditure.  Make sure you are getting the best deal you possibly can.  If you are not, see if you can move to a new mortgage.

6. Learn to Budget Properly

Look after your pennies and your pounds will take care of themselves.  Little purchases can slip under your mental radar and have a significant impact on your finances. 

You do not need to stop making convenience or impulse purchases.  You just need to know where your money is going.  Then if you are looking for savings ideas, you know where to start trimming your expenses.

7. Organise Savings Pots

Some bank accounts will allow you to tag your money for designated purposes.  This can be a great way of keeping on top of your savings goals.  For example you could have dedicated pots for holidays or Christmas.

8.  Get an ISA

ISAs are essentially tax-efficient accounts.  They can be used for cash savings or for a wide range of investments.  In short, they help you to make more from your money and give less to the tax man.

9. Take a look at investments

Investments can help to make your money grow over the long term.  There are many different kinds of investments available to suit all kinds of tastes.  Take a look and see what suits you.

10. Make Time To Review Your Finances

As you go through life your circumstances will change and your finances need to stay in sync with those changes.  Therefore make time at least once a year to ask yourself “How to organise my finances?”.  This will help to ensure that you make any changes you need to.

For more information please do not hesitate to contact the team at Ward Williams Financial Services Ltd on 01932 830664 or by email on wwfs@wardwilliams.co.uk.