Pension Advice Vouchers

There is a little known tax perk which cuts the cost of financial advice by up to £310 a year. It is in respect of legislation that came in to force last November in respect of pension advice vouchers. Employees can swap up to £500 of their pay each tax year for a pension advice voucher through salary sacrifice. The voucher can then be used to obtain financial advice about any sort of pension – it does not have to be about their company scheme.

Not all employers are currently offering the scheme. Employees who feel that it would be beneficial to them, are encouraged to talk to their employers

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.

Proposals to extend pensions auto enrolment to younger workers

The government has announced proposals to extend pensions auto enrolment to include younger workers and to amend the way in which contributions are calculated.

According to the press release:

‘The review’s recommendations, which will now be progressed and legislated for where necessary, will see:

•    automatic enrolment duties continuing to apply to all employers, regardless of sector and size;

•    young people, from 18 years old, benefiting from automatic enrolment, introducing 900,000 young people into saving an additional £800 million through a workplace pension;

•    workplace pension contributions calculated from the first pound earned, rather than from a lower earnings limit – this will bring an extra £2.6 billion into pension saving, improving incentives for people in multiple jobs to opt-in, and simplifying the way employers assess their workforces and calculate contributions;

•    the earnings trigger remaining at £10,000 for 2018/19, subject to annual reviews;

•    contribution levels reviewed after the implementation of the 8% contribution rate in 2019;

•    the government testing a series of ‘targeted interventions’ – including through opportunities to work with organisations who act as ‘touch points’ for the 4.8 million self-employed people, such as banks and those who contract labour – to explore how technology can be used to increase their pension saving.’

Under auto enrolment, employers are required to automatically enrol all eligible workers (generally employees) into a workplace pension scheme and pay a minimum contribution into their pension. Employees do, however, have the right to opt out of auto enrolment.

Currently workers who are aged between 22 and the State Pension Age with earnings of £10,000 per annum are eligible to be auto enrolled. Younger employees and those who do not meet the minimum income requirement can opt to make pension contributions.

The government plan to reduce the lower age limit to 18 by the mid 2020s, in order to encourage younger workers to get into ‘the habit of saving’.

David Gaulke, Work and Pensions Secretary said:

‘We are committed to enabling more people to save while they are working, so that they can enjoy greater financial security when they retire. We know the world of work is changing, so it is only right that pension saving does too. This ambitious package will see more people than ever before helped onto the path towards building a secure retirement.’

Mike Cherry, National Chairman of the Federation of Small Businesses (FSB), stated:

‘Requiring employers to contribute from the first pound of earnings will mean that, by 2019, hundreds of thousands of small employers will have to pay up to £180 more per employee each year. ‘For employers in certain sectors, such as care and hospitality where margins are tight, this will really add up.’

Internet links: GOV.UK news FSB press release

If you would like help or advice on complying with your Auto Enrolment duties please contact the team at Ward Williams Financial Services Ltd on 01932 830664 or by email on wwfs@wardwilliams.co.uk.

Delay to roll out of Tax free childcare

The government have announced a delay to the roll out of tax free childcare which was expected to be fully implemented by the end of 2017. From 24 November 2017 the service is available to parents whose youngest child is under 6 or who has their 6th birthday on that day. Parents can apply online through the childcare service which can be accessed via the Childcare Choices website.

In April 2017, HMRC started rolling out the childcare service via a single website through which parents can apply for both 30 hours free childcare and Tax-Free Childcare. The roll out started with parents of the youngest children first. HMRC acknowledge that over the summer some parents didn’t receive the intended level of service when using the website and that they have subsequently made significant improvements. For those parents who have had difficulties in accessing the service, compensation may be available: see childcare service compensation.

Over the coming months, HMRC will gradually open the childcare service to parents of older children, whilst continuing to make further improvements to the system. HMRC hope this strategy of managing the volume of applications will result in prompt eligibility responses when parents apply, with ‘almost all parents receiving a response within five working days, and most getting their decision instantly’.

All eligible parents will be able to apply by the end of March 2018. Parents will be able to apply for all their children at the same time, when their youngest child becomes eligible.

Tax-Free Childcare is the new government scheme to help working parents, both employed and self employed, with the cost of childcare. For every £8 a parent pays in, the government will pay in an extra £2. Parents can receive up to £2,000 per child, per year, towards their childcare costs making a total amount of £10,000. Higher limits of £4,000 and £20,000 apply for disabled children.

To qualify for Tax-Free Childcare parents and partners in the household must generally meet a minimum income level of on average £120 a week and each earn less than £100,000 a year.

The scheme will eventually be available for children up to the age of 12, or 17 for children with disabilities. Those eligible will be able to apply for all their children at the same time.

Employer Supported Childcare, usually by way of childcare vouchers, will remain open to new entrants until April 2018 to support the transition between the schemes and it will continue to be available for current members if they wish to remain in it or they can switch to the new scheme. It is not possible to benefit from both Employer Supported Childcare and Tax Free Childcare at the same time.

Internet link: Tax free childcare for under 6

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.