Auto Enrolment for pensions for Orthodontic & Dental practices is an area of your business you should already have made plans for. As you’re hopefully already aware the pensions reform legislation, introduced in 2012, will have wide-ranging effects across every field of business, including orthodontic and dental practices. If you haven’t already made provision for these changes you need to start preparing now. Firstly, you can prepare by gaining a thorough understanding of the changes and their potential impact upon you and your practice.
The attached guide summarises the main changes, what they mean to you and how best to prepare for them.
Dynamic Perceptions has asked <a href="http://www try this site.chilternconsultancyltd.com/” target=”_blank”>Chiltern Consultancy Ltd, Independent Financial Advisers, for their expertise in this area.
Chiltern Consultancy Ltd has helped a large number of companies review their existing employee benefits offering and/or implement new schemes for the benefit of their staff. With the new pension legislation in mind, they can help guide you through the options available and recommend a suitable and competitive solution to be offered to your staff.
Auto Pension Enrolment for Orthodontic & Dental Practices
While the full proposals include reforming the State Pension to make it simpler and more generous and extending people’s working lives, the key reforms affecting employers relate to the Government’s ideas for making it easier for more people to save for retirement. The Government estimates that about 9 million people are currently not saving enough for retirement. As a result, it is putting the onus on employers to help encourage more people to save:
You will be required to automatically enrol employees into a ‘qualifying pension scheme’. This could be your own company scheme if it meets certain criteria or a new qualifying scheme. This new scheme may be sourced from a traditional pension provider or one of the new entrants to the pension arena.- see “Providers”. The forerunner of these new entrants being NEST – a simple, low-cost pension scheme being introduced by the Government.
You’ll be required to contribute a minimum of 3% of each employee’s eligible earnings which is intended to incentivise them to join. Their own contributions and tax relief will be added to this to meet a minimum 8% contribution rate.
The Government recognises that these reforms continue to place employers at the heart of pension provision and that they can only be successful with your support. It is therefore proposing key measures designed to minimise the burdens on you:
Compulsory employer and employee contributions will be phased in.
Simple, straightforward, qualifying criteria for existing Company Schemes, meaning many existing schemes will meet them, although perhaps with minor changes.
A ‘light-touch’ but effective compliance regime for new employer duties such as automatic enrolment.
Automatic pension enrolment and compulsory contributions – The requirement
From sometime between October 2012 and February 2018 (depending on the size of business and type of scheme), you will have to automatically enrol all eligible employees in a qualifying pension scheme and make contributions to their plan.
Employees eligible for automatic enrolment will be:
- those who aren’t already active members of a qualifying scheme; and
- are aged between 22 years and the State Pension age; and
- have earnings above the threshold for eligibility (£10,000 in 2016/17)
The qualifying scheme may be your own company scheme, if it meets certain criteria. The important point here is that the Government has set a minimum contribution for these qualifying schemes.
While employees can opt out, for those choosing to contribute their 4% plus 1% tax relief, you will have to contribute at least 3% of their ‘qualifying’ earnings.
It is worth noting that the proposed pension contribution levels will be phased in over a period of 6 years to April 2019.
Contributions are payable on qualifying earnings, the minimum threshold for which is linked to the Lower Earnings Level for NI contributions (£5,824 in the 2016/17 tax year) and the Upper Earnings Level of £43,000 in current prices. This will apply immediately to all new eligible employees and those not currently in a qualifying scheme.
Employees between ages 16 and 21, or over state pension age but under 75, can ask to be enrolled, and you will have to pay in for them. Employees without qualifying earnings can also ask you to arrange a pension for them, but in that case you won’t have to pay in.
It is possible for you to pay more and the employee to pay less, as long as the total contribution is at least the minimum. For example, from April 2019, you can pay the full 8% and your employee does not need to make any contribution.
What this means for your Orthodontic or Dental practice
Research has shown that auto-enrolment is one of the most effective ways of triggering pension scheme membership and contribution. So, it is highly likely that your practice will incur significant additional costs through auto-enrolment. The increase will be higher for those who don’t currently offer a company scheme or who don’t currently contribute to it for their employees.
The Government has introduced auto-enrolment in stages between October 2012 and February 2018, starting with the largest employers. It also plans to phase in the level of compulsory employer contributions rising from 1% initially to 2% in April 2018 and 3% from April 2019 onwards. But the requirements are still something to be aware of.
If you have a defined benefit or hybrid scheme, the staging process will not apply as you will not be able to pay reduced contributions and phase them in gradually. It is proposed that these schemes will be brought into the legislation at the end of the staging period.
If you are unsure if your current pension scheme qualifies for auto enrolment, or have yet to make any pension provision for your practice, then you need to talk to a Pension Financial Adviser as soon as possible.
Please feel free to contact Chiltern Consultancy directly or email us and we will put you in touch with them. Alternatively talk to your existing pension adviser.
Read the guide in full
If you would like to read the guide, prepared by Chiltern Consultancy Ltd, in full then please click on the links below: