Socio-economic experts have said that financial planning and pensions are becoming increasingly important for future generations as life expectancy consistently rises every year.

A pension is a long-term savings plan which you contribute to over your working life that you can them live off later in life. Responding to the increasing importance of pensions, The Government and The Pension Regulators have introduced a number of incentives that can help individuals increase their pension savings.

This article will focus on informing employers about all of the need to know facts about pension tax relief schemes for employees.

WHO ARE THE PENSIONS REGULATORS?

CHOOSING THE PENSION SCHEME FOR YOUR STAFF

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Who are the pension regulators?

The Pension Regulators (TPR) is the UK regulator of workplace pension schemes. They therefore are a focused pension organisation that ensures employed individuals pensions are protected.

The pensions regulators are responsible for:

· Ensuring employers enrol their staff into a pension scheme (automatic enrolment)

· Protecting employee savings in workplace pensions

· Improving workplace pension schemes

· Reduce the risk of pension schemes ending up in the Pension Protection Fund

· Helping employers balance the needs of their pension schemes with business growth.

Choosing the pension scheme for your staff

There are a number of different pension schemes you can choose from as an employer for your staff. When choosing a pension scheme employers must consider which scheme is most beneficial to the employees.

Below is further information about what employers need to consider when choosing a pension scheme.

DOES THE PENSION SCHEME INCLUDE AUTOMATIC ENROLMENT?

Automatic enrolment means that staff will not be required to do anything to join the scheme, nor choose their own investments. Some schemes only accept employers with a minimum number of staff, or employees who earn a certain amount.

It is important to check if the scheme is regulated by the Financial Conduct Authority.

HOW MUCH THE SCHEME WILL COST THE BUSINESS AND EMPLOYEES?

Different pension scheme providers have different fees. Some providers will charge monthly and others will charge a one-off up-front charge for the life of the pension scheme. There can also be exit fees for employers who decide to change pension schemes.

As pension scheme members, employee’s contributions should pay the charges to cover the cost of managing their savings. Some schemes may have different charges for different members, depending on income. It is important to weigh up the cost and charges against the level of service that the scheme will provide.

WHAT TAX RELIEFS WILL MOST BENEFIT EMPLOYEES?

There are two methods that can be used to allow employees to have access to tax relief on what they pay into their pensions:

· Relief at source

· Net pay arrangements

A pension scheme can only use one method for all staff. Which method is used can affect lower and higher paid staff differently. Neither method is usually judged as superior to the other, but it can be good to be aware of what the implication of each method is.

Tax relief will only be available to employees who do not pay income tax if there is a scheme that uses relief at the source. Such schemes may have lower member charges.

The staff that pays income tax will have access to tax relief through either the relief at source or net pay arrangement methods. However, if the relief is at source, higher rate taxpayers and additional rate taxpayers will have to claim the tax relief by completing a self-assessment.