03 Oct 2012
Auto Enrolment is here at last!
As you read this Bulletin, the biggest employers in the country are coming to terms with Auto Enrolment and are attempting to navigate through the myriad of rules in order to be compliant with the new legislation and avoid the fines that the Pensions Regulator (TPR) has promised to levy on businesses that fail to comply.
The senior management team within all companies will hopefully have considered the impact of auto enrolment on their business and at the very least understood their obligations (financial and operational) at the point the legislation applies to them (their Staging Date).
We are aware that many businesses are now factoring in the future costs of meeting the legislation as part of their business planning process. These costs will be a combination of the explicit pension contributions they will be making as well as the time required to manage the administration of the auto enrolment process and on-going governance.
As part of this planning exercise, we have been asked if we can recommend any ways in which these additional costs can be offset to help soften the blow.
As always, we are happy to suggest a solution.
What is the Answer?
The answer is simply, Salary Sacrifice which is also known as Salary Exchange.
Salary sacrifice is an agreement between an employer and an employee where the employee exchanges part of their contractual gross salary in return for a non-cash benefit which in this case is pension contributions.
By exchanging gross salary before it is paid, the employee pays no Income Tax and National Insurance contributions (NIC’s) on the amount exchanged. More importantly the employer also pays no NICs on the amount exchanged.
The NIC saving can be retained by the employer, used to boost the contribution paid to the pension on behalf of the member or a combination of the two.
Next Steps
Undoubtedly, the cost of Auto Enrolment on businesses will be enormous and as a result it makes perfect sense to speak with a Specialist in this area. We recommend that all businesses take advantage of our pension scheme audit service to ensure that their proposed or existing arrangement/s are as cost efficient as possible.
Wingate Benefits Solutions are here to assist you in planning for the new reforms. Should you wish to discuss the above in more detail or any other aspect of your pension scheme please do not hesitate to contact your usual Wingate Benefit Solutions adviser or call us on 0844 406 0027.
Tax and legislation are liable to change. This information is based on WBS’s current understanding of UK law and HM Revenue & Customs practice and legislation we believe may apply in the future. No guarantees are given regarding the effectiveness of any arrangements entered into on the basis of the information contained herewith. It is recommended that professional advice is sought prior to entering into any financial arrangement.
