Business Advice

Business Advice

Work Place Pensions

The Government has announced that all businesses should offer their employees a company pension scheme, also known as Work Place Pensions which started in 2012. Auto enrolment will apply to all employees earning more than the personal income tax allowance and both the employer and employee will have to make a contribution, currently anticipated to be 3% and 4% of salary respectively.

The aim of Work Place Pensions is to provide simple good value for those who do not currently have easy access to pensions. In view of the large degree of uncertainty associated with work place pensions, such as employers knowledge of the impending legislation, we are of the opinion that this should not delay you from making your retirement savings. However we would strongly recommend that you review your retirement savings on a regular basis.

The Financial Conduct Authority does not regulate some aspects of setting up workplace pension schemes.

Key Person Insurance

An employer may take out a key person insurance policy on the life or health of any employee whose knowledge, work, or overall contribution is considered uniquely valuable to the company. The employer does this to offset the costs (such as hiring temporary help or recruiting a successor) and losses (such as a decreased ability to transact business until successors are trained) which the employer is likely to suffer in the event of the loss of a key person.

A key person can be anyone directly associated with the business whose loss can cause financial strain to the business. For example, the person could be a director of the company, a partner, a key sales person, key project manager, or someone with specific skills or knowledge which is especially valuable to the company.

Group Pension Scheme

A group personal pension plan (GPP) is a collection of personal pension plans (PPPs) provided by an employer for its employees. A PPP is a type of defined contribution arrangement.

It is available to any UK resident and can be bought from insurance companies, high street banks, investment organisations and some retailers (i.e. supermarkets and high street shops).

The policyholder contributes to the plan, the money is invested and a fund is built up. The amount of pension payable when the policyholder retires is dependent upon:

  • the amount of money paid into the scheme
  • how well the investment funds perform
  • the 'annuity rate' at the date of retirement.

An annuity rate is the factor used to convert the 'pot of money' into a pension.

The policyholder can retire at any age after age 55 (subject to plan restrictions). When the policyholder does retire, they can generally take up to 25% of the value of their fund as a tax-free lump sum. The remainder of the fund can be used to buy an annuity with an insurance company.

Pension income could be affected by interest rates at the time you take your benefits. The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation and regulation, which are subject to change in the future.