New pension laws will it cause problems for small businesses

[David Rogers]

https://www.gov.uk/workplace-pensions-employers

Not necessarily a financial drain (unless accountant time), you don’t pay out more…just do the dirty work for the gov…so instead of them using NI contributions collected today to pay pensions and hope that there will be enough being collected in the future to pay the next generation they make employers take at least 1% of earnings to put into a private pension fund…could be 3% in the near future.

Dave

[David Hammond]

A complete waste of time & effort, and just another Tax from the government thats cleverly disguised.

In reality what good is 2-3% contribution of an average salary going to do towards a pension? You’re limited to which funds you can invest in, IMHO your staff would be far better opting out, and starting their own private pension.

Bear in mind there are heavy fines for not complying with the work place pension, and staff who opt out, will need to do so every few years.

The other thing coming is the national living wage… so anyone over 25, currently on NWM will be getting an extra 50p an hour.

Both the WPP & NLW will surely increase overheads, and that’ll have to be passed onto customers.

[Paul Hodges]

quote DavidRogers:

https://www.gov.uk/workplace-pensions-employers

you don’t pay out more…just do the dirty work for the gov…so instead of them using NI contributions collected today to pay pensions

Is that really true that it won’t cost more? Up until now, you paid employees a gross wage which then has the tax, NI deducted. Now we’re going to be paying the same gross wage out, but also paying 1% pension, up to 3% I think in year 3.

From the discussions I’ve heard, it seems like small business owners are basically saying that if they have to pay out for pensions, that would be basically deducted from any future wage rises, because we can’t cover all these costs. So on the one hand, your employee may benefit from free pension payments from you, but probably wouldn’t get a wage rise which helps them right now, plus as Dave said, the schemes are crappy anyway. Some pension firms won’t even take your application now because they are so inundated, only the government one is guaranteed to take you.

But I’m not an expert on this so I may be wrong on some of those points

[David Rogers]

quote Paul Hodges:

quote DavidRogers:

https://www.gov.uk/workplace-pensions-employers

you don’t pay out more…just do the dirty work for the gov…so instead of them using NI contributions collected today to pay pensions

Is that really true that it won’t cost more? Up until now, you paid employees a gross wage which then has the tax, NI deducted. Now we’re going to be paying the same gross wage out, but also paying 1% pension, up to 3% I think in year 3.

From the discussions I’ve heard, it seems like small business owners are basically saying that if they have to pay out for pensions, that would be basically deducted from any future wage rises, because we can’t cover all these costs. So on the one hand, your employee may benefit from free pension payments from you, but probably wouldn’t get a wage rise which helps them right now, plus as Dave said, the schemes are crappy anyway. Some pension firms won’t even take your application now because they are so inundated, only the government one is guaranteed to take you.

But I’m not an expert on this so I may be wrong on some of those points

"You must deduct contributions from your staff’s pay each month.
You must pay at least 1% of your employee’s ‘qualifying earnings’ into your workplace pension (top line pre-tax). This will rise to 3% in 2019 if approved by Parliament."

Comes OFF their wages, not in addition to them. It’s a mandatory ‘tax’ to push extra funds direct to pensions instead of upping NI or lowering the pre-tax earnings limit.

That said, there’s going to be some seriously hacked-off workers as they get to take less home (few quid a week) a get nothing tangible for it…seen strops thrown over less than a pound before…

[Paul Hodges]

Ah yes, I know the employee has to have their contribution deducted from their wage, but the employer has to also pay in the same amount, which makes it sound good for the employee, but obviously is an extra cost to us employers directly.

Therefore, if you’re spending X amount extra on your employees now with the pension contributions, you’re not likely to hike their wages up any time soon now.

But you’re right, it’s a Mickey Mouse scheme really because in the big picture, the pension scheme would only really be worth anything if the employee was piling their own spare cash in to it because these mandatory contributions are quite low in pension terms.

My understanding is that a lot of employees are opting out anyway