Dealing with Pensions

Loopylouie

Hi I am a small business owner with 4 members of staff. 3 of my staff have pensions. I am not sure how to deal with this. At the moment I pay the pension company directly and do not account for this through PAYE. It is not included in staff wages its a separate payment but is this subject to tax and NI?
2 of the staff are above pension age at 68 and 72. For one of these staff I actually pay into an ISA for her.
I really want to know how I should be accounting for the pensions.
Thanks your advice is appreciated

xylophone

http://www.thepensionsregulator.gov.uk/employers/know-your-staging-date.aspx

https://www.gov.uk/workplace-pensions-employers

What is your position with regard to auto enrolment?

Have you sought the advice of your accountant?

http://www.hl.co.uk/pensions/sipp/how-much-can-i-invest/employer-contributions

Does the above help?

How do you account for the payment into the ISA? Is this not in effect wages and therefore subject to tax/NI?

jamesd

For the ISA one the amount paid into the ISA is extra gross pay on which income tax and NI has to be charged in PAYE.

For the pensions it's OK to make direct employer contributions to the pension company. Ensure that they are classed as employer contributions so that income tax relief is not added. For these you are effectively operating a "salary sacrifice" pension scheme that is good for you and your employees because it saves NI.

If you were making the pension payments as employee contributions then those would be after income tax and NI payments so you would have been supposed to deduct income tax and NI due on the amount paid in, via PAYE.

However, you do need to meet your formal auto-enrolment obligations. In your case it'll mostly be extra paperwork to do.

People can have money paid into pensions for them until they reach age 75, at which age it has to stop by law. A person who is 55 or older can just take out the money whenever they want to. So for such people the pension contributions can be a very efficient way to effectively increase their pay by the saved NI and 25% tax free lump sum you can get from a pension, even though the remaining 75% will be taxable.

mgdavid

NI is not payable for staff over SP age (2 out of your 3).

jamesd

True, salary sacrifice won't help either employee or employer for those two.