From October 2012, pension rules will be changing. All businesses will have to contribute at least three percent of their employee’s earnings into a pension fund. The new legislation will be phased in from 2012, although businesses are advised to seek advice before that date.
The new legislation will come into effect for companies with more than 80 employees from 2012, with companies with fewer than 50 employees affected from March 2014. Employees who qualify will have to contribute eight percent of their income into the pension fund, which includes a minimum of three percent from the employer. Any businesses that don’t fully comply with the new pension fund rules could receive a fixed penalty, followed by daily penalties or even prison if the business owners refuse to comply with the legislation.
There are three choices facing businesses, depending on their circumstances. A business could set up their own pension scheme, which would allow them to retain control of their employees’ benefits. If the business already has a pension scheme in place, it is essential to check compliance with the new rules to avoid penalties. A business could also use the government scheme, National Employment Savings Trust. This is suitable for employees who earn a low to moderate wage, although there are several restrictions that could affect your business.
Planning ahead is the best option for many businesses, consulting with your small business accountants for advice. Low cost accountants will be able to help you plan ahead, ensuring you have the pension scheme that gives the optimum value for your business, and employees.
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