Auto enrolment letters and updated thresholds

The Pensions Regulator (TPR) is to write to all small and micro businesses in the coming months as part of a new campaign to give them key information on auto enrolment, including when the duties affect their businesses.

In addition the auto enrolment qualifying earnings bands and earning thresholds have been announced for 2015/16. These thresholds are relevant to employers complying with their automatic enrolment obligations to enrol and then make pension contributions for eligible employees. Employers must meet their obligations from their staging date which can be found by using TPR Website tool.

The revisions in the limits take effect from 6 April 2015 and follow the recommendations from consultation with interested parties.

TPR proposes to revise the limits to the following amounts:

•             £5,824 for the lower limit of the qualifying earnings band

•             £42,385 for the upper limit of the qualifying earnings band

These limits are used by employers to calculate how much pension contributions are due where band earnings are the basis of calculation.

The amount someone must earn to be automatically enrolled into a workplace pension (the earnings trigger) will remain at £10,000 per annum instead of being aligned with the personal allowance as it has been for previous years following concerns that low paid workers will miss out on pension contributions.

If you would like help with auto enrolment please do get in touch by calling 01932 830664 or emailing us at wwfs@wardwilliams.co.uk.  Alternatively you can visit our website www.wardwilliamsfs.co.uk

Internet links: Gov  Press release

Pension wise

The government has announced the launch of ‘Pension wise’ which will offer free and impartial guidance to people on the new pension freedoms which comes into effect in April.

Economic Secretary to the Treasury Andrea Leadsom has unveiled the name and logo of the new pensions guidance service.

Pension wise will offer free and impartial information and guidance to people with a defined contribution pension approaching retirement and will be available from April 2015 for individuals approaching retirement.

Economic Secretary to the Treasury Andrea Leadsom said:

‘People who have worked hard and saved all their lives will be free to choose what they do with their money from next April.

We want people to be empowered to make informed and confident choices and I’m delighted to announce Pension wise: Your money. Your choice as the brand name for the impartial guidance service we are building.

Pension wise will be a first port of call for people with a defined contribution pension who are approaching retirement. It is a distinctive brand, making it easy for consumers to know where to go for help and guidance.’

Internet link: News

Strong demand for National Savings ‘pensioner bonds’

The National Savings & Investments website and helpline are experiencing a high volume of enquiries following the launch of their 65+ Guaranteed Growth Bonds which are being referred to as ‘pensioner bonds’.

The bonds are available for a period of one or three years. The taxable bonds offer savers interest of 2.8% over one year and a fixed annual interest rate of 4% over three years with a minimum investment of £500. Investors are restricted to a maximum investment of £10,000 in each of the two products offered.

The new bonds cannot be held within a New Individual Savings Account (NISA) and only pay interest at the end of the savings term. Where investors cash in their investment early, a penalty equivalent to 90 days’ interest will be applied.

Internet link: NS&I bonds

Starting your end of tax year planning ASAP!

The current tax year will end on the 5 April 2015, so you still have time to sort your tax planning before the year closes, but the best advice is to get it done as soon as possible.

The main areas to make tax efficient investments are Pensions and NISAs.

Pensions

Pensions are one of the most tax efficient investment vehicles, for personal contributions, you will receive 20% tax relief on your contribution.  If you a higher or additional rate tax payer you can claim a further 20% or 25% relief respectively via your self assessment. 

The maximum annual personal pension contribution that can be made is 100% of your relevant UK earnings (up to a limit of £40,000 gross).

Major changes will come into effect from 6 April 2015, from flexibility on how to draw your benefits to passing on your pension after death to beneficiaries more tax efficiently.

New Individual Savings Accounts (NISAs)

The Government also made changes to NISAs from 1 July 2014.  The annual allowance increased from £11,880 to £15,000; complete flexibility on amounts contributed to cash or Stocks & Shares, for the first time Stocks & Shares can be transferred into cash and continue to hold its NISA wrapper.

If you have not used your full NISA allowance by 5 April, you will not be able to carry this forward.  As of 6 April 2015, the annual NISA allowance will increase up to £15,240.

Alternatives

If you have used your NISA and pension allowances already, there are alternatives open to you that will offer relief to reduce your income tax along with other benefits.  Investments such as Venture Capital Trusts (VCTs) and Enterprise Investment Schemes (EISs) offer tax relief but are seen as riskier investments.

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

Helping employers identify a pension scheme for automatic enrolment

The Pensions Regulator (TPR) has opened consultation on a proposal to publish a list of pension schemes that are available to any employer, regardless of the number or workers the employer has or their levels of pay.

According to research carried out by the Department for Work and Pensions 48% of small and 79% of micro employers currently have no pension scheme and will have to choose a new one as they prepare for automatic enrolment.

TPR state they are ‘aware of 30-40 providers who offer a scheme for automatic enrolment. Of these, a much smaller number of schemes have indicated they will not reject employers on the basis of size or low value. Even fewer schemes have indicated they will accept all employers who approach them.’

To read more about this issue and the consultation visit the link below.

Web link: thepensionsregulator.gov.uk 

Tax Efficient alternatives to Pensions

2014 is the year that people were granted the freedom to plan a retirement suited to their lifestyle[1], however with the restriction of an annual allowance currently set at £40,000 (although it is possible under certain circumstances to go back 3 years to top up any unused previous allowances), a number of people might wish to look at tax efficient alternatives. Some examples could be:

• Individuals who are in danger of exceeding their lifetime or annual allowances;

• Individuals who are concerned about the income tax treatment of large withdrawals from pension, and may wish to look at alternatives;

• Business owners looking to sell – shelter any capital gain – and plan for their retirement in a tax efficient manner;

• Younger investors who would be keen to explore alternatives that could be used to replace or compliment pension arrangements.

The good news is that there are alternatives available that could be considered as potential solutions.

Two alternatives that could be suitable are Venture Capital Trusts (VCTs) and Enterprise Investment Schemes (EIS). These have been in existence for over two decades and each offer advantageous tax reliefs. There is no stigma of tax avoidance as these are well established, government backed schemes designed to encourage investment in high growth entrepreneurial companies.

Investors need to be aware of and comfortable with the risks associated with investing in VCTs and EISs, and this would be an integral part of any discussions between potential investors and Ward Williams Financial Services Ltd as Independent Financial Advisers.

We expect that in retirement there will be a significant shift to alternative tax efficient investments alongside pensions and investors of all ages should give these careful consideration.   

For more information do not hesitate to contact Cliff Pocock or Nigel King at Ward Williams Financial Services Ltd on 01932 830664 or by email on wwfs@wardwilliams.co.uk

[1] Subject to sufficient monies being set aside