New pension rules to affect businesses

Quite some time ago the Government announced that it will introduce new legislation that will persuade individuals to build a private pension. The legislation will start to take effect next year with the largest employers. Smaller businesses will have up to four years to implement the change.

In order to prepare for these changes employers will have to select a pension scheme, assess their workforce and inform employees of the changes. The changes will be staged over the next four years. For more information on staging dates and when you have to start implementing this change within your business visit http://www.thepensionsregulator.gov.uk/pensions-reform/staging-date-timeline.aspx.

Employers and workers will make a combined contribution of 8% of an employee’s annual salary, where employer contribution is a minimum of 3%. Employers will then have a choice to increase their contribution so that workers pay less than the required minimum of 5%, but the total amount contributed must be at least 8%.

The financial contributions for workers between 22 and the state pension age are as follows: The minimum monthly contributions for workers who earn more than £7,475 a year is £10.16 (individual contribution) and £6.10 (businesses contribution). All workers who earn more than £34,000 will pay a maximum of £118.77 (individual contribution) and £71.26 (business contribution). Taking these thresholds into account in some cases contributions of up to £236 per couple may apply (these amounts were estimated using the employer contribution tool on The Pensions Regulator’s website).

Further reading and employer information: http://www.thepensionsregulator.gov.uk/employers/essentials-employers.aspx