We’re going through changes…

I had an interesting conversation yesterday with an employer, which shows how much you can tell people something and they don’t listen. I’ve been working with this particular employer for several months looking at their data issues and how they can assess their employees each payroll cycle.

At the beginning of every project I outline to every client how the assessment process will work and one of the questions I make a point of asking is “how much spare time do you have between payroll cut-off and the time you pay”. The answer from payroll is indubitably “never enough”.  

Auto-enrolment imposes new duties on the employer, which must take place between the payroll cut off and pay date. The chances are that you might have to make some serious changes to the way the company works to accommodate this. This might mean bringing the cut off date forward or being tougher on timesheets. 

Whatever happens, you are going to have to consider how auto-enrolment is going to fit into your business as usual in a workable fashion.

 

Rob Barksfield

Auto-enrolment Consultant 

Telephone: +44 (0)20 7893 3972

Email:  contactus [@] broadstoneltd.co.uk

A telling off

Right, today I'm putting on my schoolmaster's hat and sending you to detention, your punishment is to write out a hundred times "I will start to plan my auto-enrolment early enough".

We're now entering the busiest part of 2014 – for me & my team there won't be much free time between now and August. The workload is planned and we know what we have to do to look after our existing clients, but it's the new clients who present us with a problem.

So many employers have simply not left enough time to prepare – two weeks before the February 1^st staging date and I was sitting with employers who haven't even started their planning – you might need to implement a new pension scheme, review employee contracts, change your payroll process. Two weeks isn't enough to make any of those changes.

Please do yourself (and your auto-enrolment consultant) a favour – start your planning at least three months before your staging date.

 

Rob Barksfield

Auto-enrolment Consultant

Telephone: +44 (0)20 7893 3972

Email:  contactus [@] broadstoneltd.co.uk

Where blossomed many an incense-bearing tree

Indulge me, but for those who saw my last post, the heading will make sense.  As a follow up to my garden related synopsis of the UK economy, Tuesday saw that the inflation figure for the UK has fallen below 2%. This is interesting as it is the first time that it has dropped below the Bank of England's target for inflation for four years. Secondly, it adds more credence to the view that interest rates are not going to rise any time soon in the UK, despite the pick up in GDP and the unemployment rate dropping close to the 7% mark. 

The latter, you will remember, was the rate at which the Bank of England would start to even consider interest rate rises.  Despite the media's best attempts to whip up fear about interest rate hikes on the way,  this was never the trigger that the Bank of England would have used to increase rates.

As I mentioned in January, it really does seem that interest rate rises are still some way off, as at least for now, the UK enjoys GDP growth and low inflation. 

 

 

Matthew Phillips

Managing Director

Telephone: +44 (0)20 7893 3456
Email: getintouch [@] broadstoneltd.co.uk

What is a pension?

Actually this is a pretty good question, given that several million people will have one by 2017 and as I know from years of employee pension talks that not many people actually understand what they are.

The technical answer probably runs something like “a tax efficient savings vehicle with limitations around contributions and decumilation” – which means nothing to anyone outside the pensions industry!

Simply put its “one way of saving for retirement that’s got a few incentives to it”. Now I do like a good pension plan. It’s one of the ways that the Government encourage people to save.

If a person puts in 80p then they get the other 20p they’ve paid in income tax put into the pot as well (more if they’ve paid a higher rate of tax). It’s invested in the pot and hopefully grows tax efficiently in the pot until you take it out (although the value of the investment can go down as well as up).

Once the money’s in the pension, it can’t be accessed until you are 55 – which is great for stopping you spending it on holidays / cars / extensions – it’s not supposed to be for that type of expenditure.

There’s been a lot of bad press about pensions over the years and I’ll be the first to admit that they aren’t perfect. However, for a lot of people they are a very good way of saving for retirement. We are helping employers cope with new legislation where they have to auto-enrol employees into a pension. You’ll find more information on our website.

Rob Barksfield

Auto-enrolment Consultant

Telephone: +44 (0)20 7893 3972

Email:  contactus [@] broadstoneltd.co.uk

Financial worries at work

I was intrigued by the results of a piece of research released by Scottish Widows recently.  According to the research conducted, 14% of Britons spend an hour or more a day worrying about or dealing with money worries.  This is quite a stark statistic, a 10-15% drop in performance of 10-15% of your workforce. 

Within the same research 85% of people agreed that having a plan in place helps to ease worries and anxieties. This certainly chimes with our experience of delivering financial education combined with individual planning.  People do not want, nor often need, financial products.  They need reassurance, they need challenge, they need strategy.

With banks rapidly removing themselves from the advice space there is a desperate need for financial education.  Employers can help fill this void by partnering with a Chartered Financial Planning firm like BROADSTONE who specialise in strategy not product sales.  The results can be very impactful and lead to a more focused and productive workforce.

Matthew Brown

Regional Director


Telephone: +44 (0)20 7893 3456

Email:  getintouch [@] broadstoneltd.co.uk

   

Auto-enrolment: No time like the present

There are many quirks that I’ve come across when looking at auto-enrolment pensions with clients, one of my favourites is how you treat a zero hour contract worker for auto-enrolment. Like it or not, if they have a contract of employment with you and you pay them through your payroll, then the chances are that you will still have to assess them for auto-enrolment – although I have to caveat that and say you should seek legal advice.

Now, this shouldn’t hopefully be too much of an issue for most employers – you’re already going to be assessing the rest of your employees, so you’ll just have to add the zero hour workers onto the list. Not so bad for the smaller employers, but having just dealt with an employer of 900, where 850 employees have zero hours contractors I have seen it cause some challenges!

If you are a cost conscious employer, it shouldn’t dramatically increase the pension bill either, since many of these workers earn less than the £787 per month to trigger auto-enrolment, plus you can use postponement to mitigate the cost further.

The main challenge around zero hour working is the payroll data. These workers by their nature tend to come & go quickly and getting timesheets in for their irregular hours is not always easy. So if you have zero hour workers, you might need to look at earlier cut off dates for getting information into payroll, so that you can fit in the auto-enrolment assessment with enough time to spare.

Rob Barksfield

Auto-enrolment Consultant

Telephone: +44 (0)20 7893 3456

Email:  contactus [@] broadstoneltd.co.uk

 

 

Pension Auto-Enrolment - Non-Executive Directors Beware!

Only this week we have had a number of discussions with clients, who hold non-executive directorships, who were unaware that by automatically becoming a member of a pension scheme they could seriously affect their own pension arrangements.

This is because of the roll-out of auto-enrolment pensions (a new law requiring every employer to automatically enrol workers into a workplace pension scheme).

We are therefore advising all of our clients who have substantial pension benefits, protected lifetime allowances (the maximum you are permitted to have in pension assets by value without a future tax charge) and have one or more Non-Executive Directorship (NED) roles to check this out with their respective payroll departments.  This is to ensure they are not automatically enrolled in a pension scheme.

There are exemptions in place that are likely to cover most NEDs, however our concern is whether our clients, and the companies they are working with, are aware of these exemptions.  If they are not, there is a chance they could inadvertently become members of a pension scheme.

For clients who have protected lifetime allowances (potentially uncapped), being auto-enrolled could result in the loss of this protection and a reduced lifetime allowance of £1.25m.  In monetary terms this could easily lead to a six figure future tax charge!

Please do give us a call if you are a NED and please click on the link below if you would like to learn more on this and other planning ideas to consider before 5 April 2014.

Click here for 10 Planning Ideas to do before 5 April 2014.

Antony Summers
Private Client Partner

Telephone: +44 (0)20 7893 3456
Email:  getintouch [at] broadstoneltd.co.uk

So whose advice is it anyway?

The moral of this story is: whoever you select as your ‘first port of call’, they must be a Trusted Adviser who will co-ordinate/facilitate and bring together the most appropriate legal, accounting and financial advice you need.

 

The background to this blog began in 2004 when professional advisers ‘depolarised’ to make it easier for clients to understand who they should turn to for specialist advice.  

 

Regulatory bodies have since ‘tinkered’ with these parameters, by introducing “Alternative Business Structures” (ABS), creating a layer of uncertainty for clients.  

 

In the commercial world, “ABS” permits non-lawyers to work in legal practices and as such offer the potential for clients to be benefit from a ‘one stop shop’; legal/accountants or legal/ financial services or a mix of all three under one roof.  

 

By way of an example the Co-op is licensed by the Solicitors Regulatory Body to offer legal services and it is proposed the Institute of Chartered Accountants of England and Wales (ICAEW) should be licensed to file Probate work.    

 

As a result your options are more diverse - but less clearly defined.  

 

So, in order to square the circle who should you speak to?   

 

At BROADSTONE we put our clients’ financial planning first working closely with their other professional advisers to bring about the best results – perhaps we can help you.

 

 

 

 

Helen Wilson

Consultant

 

Telephone:  +44 (0)20 7893 3456

Email:  getintouch [at] broadstoneltd.co.uk

And there were gardens bright with sinuous rills

Over the last couple of days two statistics have been reported that we really should take note of.  Firstly, unemployment in the UK dropped to 7.1%. Quite apart from the fact that this is good news for everyone in work and seeking work, it is important because it is a another step closer to the 7% unemployment rate that Mark Carney, Governor of the Bank of England, has said would be one of the preconditions for an interest rate rise.  Secondly, the Government has published its findings that over the last year, take home pay has risen in the UK.  Finally today we have seen that growth in the UK is at its highest since 2007, with an annual growth rate of 1.9%.

 

 

More people in work, and people getting paid more is the rich soil in which the seed of inflation grows. The strimmer of inflation, to stretch my analogy further, is interest rates.  So we seem to have taken another big step closer to the interest rate rise that we have known is coming for some time.  Higher interest rates are bad for the prices of gilts and corporate bonds, better for savers, and importantly will be of great benefit to defined benefit pension schemes and those purchasing annuities. However, I personally don't think that interest rate rise is coming imminently.  The green shoots of economic recovery have only just started to appear and like the daffs in my garden could be easily snuffed out by an icy blast. In my opinion, growth needs to be bedded in before it is reined in.  Comments from the Bank of England and Vince Cable seem to bear this out with the Governor playing down chances of an interest rate rise yet.   So we might have several months of cheap money, lower unemployment, and economic growth ahead. Everything in the garden seems rosy....

 

Matthew Phillips

Managing Director

Telephone: +44 (0)20 7893 3456
Email: getintouch [at] broadstoneltd.co.uk

Qualifying Earnings - Confused?

OK, this one’s a technical blog, but I’ve tried to keep it jargon lite.

Why “Qualifying Earnings” (QE) just became an important term for you to understand. If you’re not familiar with it, you need to be, because it’s one of the key criteria around which auto-enrolment is based.

When the legislation was put in place, the employee assessment and minimum pension contribution level was built around this concept of QE – this isn’t just the basic pay of an employee but takes into account bonuses, commissions, maternity pay etc.

What’s confusing is that you don’t have to pay the pension contributions on QE if you don’t want to, you could just pay them on basic pay, but you still have to assess the eligibility of the employees for auto-enrolment on the Qualifying Earnings basis. This could catch you out like this:
 
An employee earns £729.10 per month, below the auto-enrolment trigger level of £787.

This month she is being paid overtime of £94.22 and bonus of £60.02, both these amounts are not pensionable. 

But as her Qualifying Earnings are £883.34, she is now over the auto-enrolment trigger and needs to be enrolled – despite her pensionable pay being less than the trigger level.

Confused? You’re not the only one.  These are real figures from one of our clients who used their payroll provider to do the assessment and then checked the figures to find out that 30 of their employees who had earned bonuses this month were now eligible, but wouldn’t have normally been.

Make sure you understand the difference between how to assess your employees and what pension contributions to pay because they might be different.

Rob Barksfield
Auto-enrolment Consultant

Telephone: +44 (0)20 7893 3456
Email:  contactus@broadstoneltd.co.uk