Your staff may thank you for considering their future when it is time for them to retire.
During these times of economic turmoil many practice staff are concerned for their present position and also their financial security in retirement.
Media speculation is rife about proposed Government changes to workplace related pension schemes, and your employees will naturally turn to you as their employer for advice, help and support.
You need to fully understand the legal responsibilities your practice has to the employees, including your responsibility to keep them informed on matters relating to their pensions. Whilst the prospect of discussing staff pension rights and employer obligations is hardly exciting, the process is usually beneficial for both parties. Individual staff members will recognise the value of a pension scheme as part of their employment package, and their improved understanding will enable more enlightened planning for their retirement. As an employer, you are likely to find offering an attractive pension scheme assists in the recruitment and retention of quality staff, and it may also reduce your tax and National Insurance liabilities.
Since October 2001, a practice with five or more employees must offer access to a pension scheme. All relevant employees including part-time and temporary workers count for this purpose. The pension can be offered in three ways:
1. an occupational pension scheme
2. a personal pension scheme to which you contribute
3. or access to a stakeholder pension scheme.
If you do not have your own occupational or group personal pension scheme, and have more than five relevant employees, (including the practice principal and partners) you must offer them access to a stakeholder pension scheme. The employees do not have to join it, but they must be told about it. If you fail to provide a suitable scheme within three months of the employee becoming eligible, you risk a fine from the Government’s pensions regulator.
Non-relevant employees are those whose earnings fall below the lower earnings limit (currently £95 per week), are under 18 or who have worked for the practice for less than three months.
What is it?
Stakeholder pension schemes must meet minimum criteria to ensure they offer value for money, flexibility and security. Charges are limited to 1.5 per cent of the fund value for the first 10 years and one per cent thereafter. There are no charges for transfers in or out of the scheme and permitted minimum contributions must be £20 or less. Members may vary the frequency and value of their contributions at will without penalty. The value of their ‘stake,’ combined with tax relief and investment income, enables the ‘stakeholders’ to purchase a pension when they retire.
Employers’ contributions
You do not have to make employers’ contributions to the scheme, though you can if you wish as an additional employee benefit. However, you must make it easy for your employees to contribute by offering to automatically deduct contributions from their pay or by enabling a direct debit facility.
Setting up
The first step is to contact the pensions regulator or visit www.thepensionregulator.gov.uk and choose a registered scheme provider. Most dentists delegate this task to their accountant or financial advisor, as consideration should be given to the financial strength, customer service and ease of administration of the provider’s products. Not all providers accept all employers (details are on the website).
Once you have decided on a provider you must consult with your staff about the scheme you have chosen, but although you must consider their views you are not obliged to act on them. Only after this consultation can the provider be formally appointed.
The provider will require you to advertise details of the scheme, on the staff notice board or with flyers for example. The provider will also require the contact details of all relevant employees so information can be issued directly to them.
Extra work
The regulations insist stakeholder schemes are easy to manage, and most providers offer an automatic calculation and payroll deduction facility. They will also assist by keeping a record of any payments made by the practice.
The appropriate payments must be sent to the scheme provider by the 19th of the month following the calendar month the deductions were taken from the employees’ salaries.
As well as the collection and transfer to the provider of the employees’ contributions, you should keep a record of all pension related correspondence and emails that have been sent to your practice staff. A record should also be kept confirming any arrangements you have made with the scheme provider regarding direct access to your staff.
If you’re unsure of your present situation, just ask yourself whether your practice has five or more relevant employees, and if so if you have in place a pension scheme which they may join. If the first answer is ‘yes’ and the second is ‘no,’ you are risking a fine and should contact your financial adviser about establishing a stakeholder pension scheme without delay.
Changes to work place pensions are due to be implemented by all employers by 2012. In a future article we will explain these proposals and how they will affect your practice.
For more information call 020 7376 9333 or visit www.lansdellrose.co.uk