Employers and employees need to watch out for the new provisions on pension contributions tax trap when negotiating redundancy arrangements, if (broadly) taxable income exceeds £130,000.

Once the £130,000 limit is reached then any sacrifice for pension contributions could result in an unexpected tax bill.

Cathy Corns is a tax adviser and a partner at Mercer & Hole. The views given in this blog are personal to the author, if you would like to discuss the contents of this post with Cathy you can call her on 01908 605552.

• Email This
• Print
• Comments (2)
• Trackbacks

There seems to be a lack of knowledge about the proposed Pensions Act 2008 and the new requirements it will impose on employers from 2012.

I know this is not an immediate problem but there are a few things that may need to be considered in advance:-

• Not all employers currently pay into pension schemes for their employees.
• Not all employees have joined the pension schemes provided.
• From 2012 all employees aged 22 and over earning more than £5,035 (in 2006/07 values) who are not in a workplace pension scheme with compulsory contributions from their employer will be ‘auto-enrolled’ into one.
• The responsibility for making this happen will rest with the employer.
• If an employer does not have a ‘Qualifying Workplace Pension’ scheme in place by 2012 they will have to ensure their employees are auto-enrolled into a default scheme that the Government is setting up.
• Employers who do not comply will be subject to ‘compliance notices’, ‘penalty notices’ and, quite possibly, fines.
• Employers will be compulsorily required to pay contributions of 3% of their employees’ earnings (between a lower and upper threshold) towards their pensions while they are members of ‘Qualifying Workplace Pension’ schemes.

• Email This
• Print
• Comments
• Trackbacks