Which Way Financial Solutions believes that understanding the often jargon-littered world of pensions and benefits is best achieved through educating employers and employees to make informed choices about what is best for them. At Which Way Financial Solutions, we believe in forming positive and valued relationships with those we work with whilst valuing our philosophy of “it’s all about you.”
Automatic Enrolment is part of the Government’s Workplace Pension Reform programme. It is part of their solution to ensure we all save enough for our old age.
Employers, regardless of size, will have to carry out certain tasks to decide whether an employee will automatically join a pension scheme (no application forms required) and potentially both parties will contribute a % of their earnings.
As with all things pensions related there are some new technical terms that have been introduced such as staging date, postponement, qualifying earnings, eligible jobholders, entitled workers and many more.
If you are an employer you will interact with The Pensions Regulator who is responsible for ensuring that employers comply with the new rules. There are penalties including large fines for non-compliance. Doing nothing, from an employer’s point of view, is not an option!
At WWFS we are here to help employers navigate through the maze of Automatic Enrolment – this includes helping you to understand the rules and what they mean to you; advising you on how to structure your approach; sourcing the right pension provider as well as assisting with the implementation side of things; and educating employees as to how it will impact on them. For employers who have staged already we can work with you to make sure you continue to be compliant with current legislation. If you have experienced problems with the running of Automatic Enrolment, we can see if we can help to solve those problems.
We can provide one off and on-going employer advice/support and employee assistance/education.
Salary Sacrifice (Pensions)
Salary Sacrifice (also known as Salary Exchange) is currently on of the most tax efficient ways for an employee to structure how they pay their pension contributions.
Different forms of Salary Sacrifice exist, for example: Cycle to Work Scheme. At WWFS we look at how it can be used with pension contributions and would suggest if you are interested in other applications that you speak with a specialist employment tax accountant.
This can be applied to regular and single pension contributions as well as a way of receiving a bonus (this is known as Bonus Sacrifice).
How Does It Work?
- It is a contractual agreement between the employer and an individual employee (forms part of the contract of employment)
- An employee’s pay is reduced, each pay period (reducing the amount of tax due from both an employer and employee); in return the employee receives an increased pension contribution from their employer
- The employer decides how to structure the tax savings
- Possible benefits include the employee having a slightly higher net take home pay (after exchange) and the employer sharing the employer National Insurance Saving (currently in 2015/16 tax year 13.8%) in someway with the employee
- Both parties can be better off under Salary Sacrifice
There are a lot of factors to consider before deciding whether Salary Sacrifice is right for an employer to offer to staff. Similarly to Automatic Enrolment the key is to understand the position and options and then design your own set of rules.
WWFS can help you to understand the options and help you to work out whether Salary Sacrifice is right for you and how to implement your chosen strategy as well as then reviewing it to ensure that it is still working correctly.
In the movie Braveheart, Mel Gibson’s character (who has a blue painted face) is on the battlefield, about to face the English and he cries to his troops to inspire them, that they are fighting for their freedom!!!
Since April 2015 we now have freedom and control of how and when we draw our pension benefits. From age 55 (rising to 57 in 2028) people can now decide how and when they can draw their pension benefits: two new extreme options are that you could spend you entire pension fund in one go or don’t spend any of it and pass the fund down to future generations (outside your estate for Inheritance Tax purposes).
Peter “Spiderman” Parker’s Uncle in the movies says “with great power comes great responsibility” – whether we like it or not, we are now masters of our pension universe and need to make sure that we make the right choices (for ourselves and loved ones – both when we draw our benefits and beyond).
Whether you prefer to do it yourself or seek specialist support – it is important that you understand what benefits you have (both pension and non-pension), what your options are (for generating income and capital), what the implications of your decisions are, including the tax position and how what you do when you first draw your benefits, will potentially impact in the future.
One thing that is certain… it is not a simple and straight forward decision. At Which Way Financial Solutions we can help individuals understand their position and options to assist them in making make good, informed choices about their retirement (crystallisation) options.
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