Building the NEST eggs for the future

The worst effects of this may be that many chambers suffer a reduction in their income, a reduced ability to attract and retain high quality clerical and administration staff and increased competition from other sets of chambers for each piece of work. However many sets of chambers are taking a more resilient and adaptable approach to change and looking to be more robust and positive.

The future: employee benefits for clerks and admin staff

Many clerking and administrative staff are considering their positions in view of the likely changes. They wish to ensure that they receive the most attractive package in order to safeguard their future. A competitive and extensive employee benefits package including pensions, life cover and income protection are seen as an important part of the overall package.

In recent months, chambers have begun to review their current employee benefits’ packages to ensure that they are competitive both in cost and provide the required level of benefits to staff. This situation will be exacerbated by the fact that from 2012, on a phased basis, employers will be required both to set up and contribute to, a “qualifying pension arrangement” for their employees, in accordance with the Government’s plans for “Auto-Enrolment”. This is a considerable advance on the previously introduced “Stakeholder” schemes. It will actually require pension contributions to be made, rather than merely for a scheme to be set up. This could be considered almost as another tax but if well prepared for in advance it should not prove too much of a shock to the budgets of chambers, and there are some tax relief benefits for employers.

Getting prepared

It is possible for a number of insurers to agree a package of employee benefits suitable for chambers. This include Group Pensions, suitable to satisfy the Auto-Enrolment requirements, with Group Risk Schemes (Group Life Assurance and Group Income Protection) currently being finalised.

Scottish Widows, with whom the authors have worked, comments: “Although the legislation is not likely to affect the majority of employers until 2013 and 2014, now is the time to start making preparations for the changes, as it is likely that there will be a financial impact on your clients’ businesses.
“There are steps employers can take now to minimise this impact. For example: increasing the existing qualifying scheme membership over the next few years will help avoid a sudden increase in costs. This also has the advantage that the employer can promote the benefits of joining the pension scheme with a positive message, rather than communicating with staff that they will be auto-enrolled, which could be viewed negatively.

Salary exchange can reduce costs by deducting the employee’s contribution from their salary before tax and National Insurance. This saves on National Insurance Contributions for both the employee and employer, allowing a higher contribution to the pension at no extra cost to either.”

Whilst this article is for general guidance only, we believe chambers should select the required benefits from an “off the shelf” package, which in turn will lead to simpler, faster, more efficient and cost-effective implementation.

Neil Millard, Director, Cavanagh Wealth Management.
For further information please contact the Corporate Team on 0844 264 0329 or e-mail barcouncil@cavanagh.co.uk

Pension scheme auto-enrolment

What is it?

The Pensions Act 2008 introduced legislation which is intended to make employers responsible for ensuring that all employees contribute to their retirement income needs through the establishment of in-work pension schemes. The legislation states that “… the employer must make prescribed arrangements by which the jobholder becomes an active member of an automatic enrolment scheme.” Employers must make available and enrol their employees into a pension scheme to which both they and the employee must contribute.

The intention is that these pension schemes are set up either by the employers themselves or via a scheme to be set up by the Government, known as the National Employment Savings Trust (“NEST”).

The main proposals

From 2012, initially all large employers and eventually all employers regardless of their size will be required to auto-enrol their qualifying employees into a suitable pension scheme. The largest employers will be required to comply immediately and a programme to include small employers will be rolled out from October 2012 to September 2016. This is known as “staging” and employers will be given 12 months’ notice by the Pensions Regulator of their requirement to comply. Companies with a single director and no other employees will be exempt.

Qualifying employees will be those who have been employed for at least three months, are aged over 22 and with earnings at the level of the personal tax allowance or higher.

A suitable scheme (one that passes the scheme quality test) will need to be in place or NEST could be used. Employers will need to certify each year that their scheme meets the minimum necessary standards.

From October 2012 the contributions level will be two per cent of qualifying earnings (with at least one per cent from the employer). In October 2016, this will increase to five per cent (with at least two per cent from the employer) and in October 2017, this will increase to eight per cent (with at least three per cent from the employer).