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After CQC, comes CPC...
7th Mar 2011
Practice principals should take note: compulsory pension contributions (CPC) are officially back on the cards, with the roll-out of this new scheme beginning next year.
By the end of the enrolment period (2014), employers – including practice principals – can expect to be paying a 3% contribution annually towards employee pensions.
On top of the many additional running costs that the private sector has had to absorb in recent years, including VAT increases and the hidden price of making practices Care Quality Commission-ready, CPC will come as something of a blow to employers, including dental businesses, who do not already have a pension scheme in place for workers.
Although small businesses (50 employees or fewer) such as dental practices will not be directly affected until August 2014, principals may wish to start planning ahead in order to minimise any impact on their long-term budget so that patients and services remain unaffected.
Rather than simply go along with the scheme as it stands to avoid appearing uncaring to staff, practice principals do have some viable alternatives to consider which could prove to be less painful financially but still benefit employees.
It is a little known fact that CPC compliance can actually be achieved by instituting a salary sacrifice pension plan. Asking staff to take a small cut in salary, the balance of which goes towards their pension pot, not only results in lower income tax for staff (because their overall taxable income will be less) but could also reduce National Insurance contributions for both employer and employee by 13.8%, savings that could be added to the worker's pension pot. In the long term, this could mean that final pensions could be increased by up to 31% larger – and all this, without costing the employer a penny!
Salary sacrifice pensions can create a win-win scenario for both employer and employee and will certainly save GDPs a lot of money, all of which can then be reinvested back into the company, ultimately benefiting patients – that of corporation tax, the sums soon start to add up in your favour.
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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