Nothing new there. However, in the future there will be a lot more of us! It is this demographic shift that is behind upcoming legislation that will have a big impact on your dental practice business. In what is widely being seen as the biggest shake-up of pensions since the introduction of the basic state pension in 1909, it is being introduced to counter the threat of an ageing population with no pension provision. As an employer it has, perhaps unsurprisingly, been passed your way.
The Pensions Act 2008 means that if you are a business owner you MUST:
- Inform workers about upcoming pension changes and how they may be affected
- This must be provided in writing
- Ensure that you are compliant with all regulations – fines of up to £5,000 per day can be applicable
- AUTOMATICALLY enrol all eligible employees into a Qualifying Workplace Pension Scheme (QWPS)
- Pay contributions for every employee who does not opt out as well as cover the costs of administration
How will I meet these obligations?
There is a lot to put in place. For financial planning purposes you should really be thinking about these changes NOW. From October 2012, every business in the UK will have been allocated a ‘staging date’. The government feels that (in its eyes), it has been lenient with small businesses and in November 2011 it announced extra time so that they can prepare for the reforms. This now means that small businesses will see a staging date somewhere between 1 June 2015 and 1 April 2017.
A long way away? I remember that 2005 summer’s day when London was awarded the Olympics like it were yesterday?!
Once a worker is enrolled into the QWPS, the minimum contributions will be:
- 8% of earnings of which:
- 3% to be paid by employer
- 4% to be paid by employee
- 1% tax relief paid by both
Which of my team are eligible for the QWPS?
It is very likely that all of them will be. For instance, agency and temporary workers will be included as well as full and part-time team members. It is your responsibility to assess all of the workforce and provide them with relevant information. Put bluntly, you are responsible for who gets what and when.
An understandable reaction. And, human beings what we are, the natural reaction is to leave it all until the last minute and hope that all will be well. This is not the time to take that approach. It is likely that a number of companies will offer complete solutions to dentists (at a price) but as the deadline looms larger, the terms on offer are very likely to become less advantageous.
One solution to consider is to set up a plan early to take advantage of the best terms, cut back on the sleepless nights and then leave the scheme dormant until it is needed. However, we would venture to suggest that you take this opportunity to improve your staff benefits. There is nothing to stop you offering the pension scheme to all staff early and having an enthused and motivated team.
As you can imagine, at Frank Taylor & Associates we evaluate and sell a large number of dental practices! Dentists are always keen to know how they can improve the potential sales figure for their practice when the time comes. The better that your staff benefits are, the more staff that your practice will retain and the easier it will be to recruit (if necessary). A long-term, settled staff mean more value in the business when the time comes to sell. Any business with happy and contented staff is, quite simply, worth more.
And another thing…
As if this wasn’t enough to worry about, as of April 2013, HMRC will require what is known as ‘Real Time Information’ (RTI) in regard to PAYE and payroll information.
Using RTI, you will tell HMRC about tax, National Insurance contributions (NICs) and other deductions when or before the payments are made, instead of waiting until after the end of the tax year as currently.
HMRC’s aims are that RTI will:
- make the PAYE process simpler and less burdensome for employers and HMRC; for example by removing the need for the end of year return (P35 and P14) and simplifying the employee starting and leaving processes
- make PAYE more accurate for individuals, over time reducing the number of bills and repayments sent after the end of the tax year
- enable HMRC to pursue late payments more effectively
- support the payment of Universal Credits
- reduce Tax Credits error and fraud
The cynic in me suggests that it is particularly keen on points 3 and 5! You need to ensure that your payroll arrangements will take account of these imminent changes.
What should I do now?
Something! DO NOT bury your head in the sand and hope that this goes away – remember fines of £5,000 PER DAY. You are more than welcome to call our Pension Reform and Payroll Helpline on 08456 123 434 for some helpful advice, ease your worries and let you get back to the dentistry.,
Andy Acton is a director and co-owner of Frank Taylor & Associates – the leading independent valuers and sales agent to the dental profession. Its sister company, Loan Hunter, provides financial solutions to the dental industry. Andy is a regular contributor to the dental media and has also delivered many lectures across the UK.
Phone 08456 123434
Frank Taylor & Associates