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Pensions – the last thing on your mind?
17th Feb 2011
Compulsory Pension Contributions (CPC) may be the last thing on dentists' minds as they try to cope with the recent VAT rise, as well as contend with matters like CQC registration.
However, given the government's decision to reintroduce 2012 as the start date for the roll-out of this change in employment legislation, it is important that all dental practices take the time to get to grips with the implications this could have for their business, as pensions is an area that looks set to impact heavily on all employers.
In a nutshell, beginning in 2012 with large corporations (120,000 employees or more) all employees who do not yet have access to a company pension scheme will be automatically enrolled into and required to contribute to some form of pension arrangement unless they formally ‘opt out' in writing.
Naturally, employers will also be expected to match employee contributions, adding further to staff costs and overall business overheads.
Despite the bad news regarding the reversion from 2017 to 2012 as the starting date for CPC – a decision made largely in view of the looming pensions crisis caused by people's longer life expectancy – the good news is that many dental practices will have a little longer than most to sort out where the extra money will come from.
Because most dental practices are classed as being ‘small business', having 50 employees or fewer, they will be exempt from the scheme until August 2014.
Further good news is that initially, the amount payable by employers will only be a certain percentage of employee earnings between £5,715 and £38,185, rather than on their full salary.
In addition to this, company contributions will be phased in gradually in stages, so that during the enrolment period (October 2012 to September 2016) employers will only pay a 1% contribution.
This will rise to 2% in October 2016 and finally 3% in October 2017.
So, what sort of figures are we talking about then?
It is likely that dentists will be looking at paying out an annual pension contribution of anything between £279 (for an employee on £15,000 or less) to £974 (for an employee earning in excess of £40,000).
Despite the gradual introduction of these payments, one thing is certain: unless the government has a change of heart, all GDPs will need to have a found a way to tighten their belts by 2014.
Fortunately, with another three years to go before then, wise practice principals will start looking at ways to cushion the blow.
For more information please visit www.lansdellrose.co.uk or call Lansdell & Rose on 020 7376 9333.
Author
Michael Lansdell
Michael was brought up in South Africa, receiving his honours degree there in 1991. He completed his training with international accounting firm Deloitte in 1994, and went on to become a founding partner at Lansdell & Rose Chartered Accountants (SA) a year later. Based in Kensington, London, Lansdell & Rose deals only on a long-term retained basis, exclusively with owner managed clients, generally dentists and doctors, and specialising in the incorporation of dental practices. As a client focused team, they look for sustainable long-term solutions for their clients that maximise profits, minimise tax and build wealth.
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