How we can help you with your auto enrolment pension scheme?

Employers will be aware of the highly publicised changes to legislation in October 2012 which has paved the way to an auto enrolment pension scheme for every employee in UK. Over the 5½ year period, which follows, on a sliding basis starting with the largest companies, auto enrollment is becoming compulsory.

Auto enrolment is just that; the default position being that an employee will be entered into a qualifying pension scheme and is given the option to opt out, rather than opt in.

Whilst companies are free to decide how to implement the scheme, they must ensure that they have a satisfactory means in place to comply with the legislation, ahead of the deadlinefor their organisation size.

One means of providing pension contributions is to implement a salary sacrifice scheme. This is a scheme where an employee agrees to forego a portion of their gross salary and, in turn, the employee agrees to pay an equal or greater amount into that employee’s pension scheme.This has obvious advantages for both employer and employee alike, most specifically the avoidance of National Insurance Contributions (NIC’s) as this sum is paid from the employees’ gross rather than net salary.

HMRC have recognised this as a proper means of taking advantage of an NIC payment exemption and the combined NICsaving across both parties can be over 13%. Commonly this saving is then apportioned between employer and employee.

Any form of salary sacrifice needs to be dealt with correctly;not only for it to ensure it does not fall foul of tax and pensions legislation but also to avoid inadvertently breaching employees contracts.

HardingEvans’ employment specialists have created a Salary Sacrifice pack containing relevant information on salary sacrifice,together with pro forma letters for correctly implementing a scheme and advising employees of their rights.

How we can help you with your auto enrolment pension scheme?

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