DarkLight mode
News – 10.04.24
Form PF: Are you up to speed with the latest developments?
Through this insight we will bring to your attention the main changes in a bitesize manner so that you can stay abreast of the requirements as they may apply to your firm. … Read more
Insight – 16.04.24
US and UK tax on carried interest
US and UK tax on carried interest … Read more
Upcoming event – 29.04.24
Governance code updates and advice for Further Education colleges from Buzzacott and the ESFA
Join Buzzacott and the ESFA for a governance update for further education colleges … Read more
Find us quickly
130 Wood Street, London, EC2V 6DL
enquiries@buzzacott.co.uk T +44 (0)20 7556 1200
Following this change, the Government has only agreed an interim method for equalisation which will be in effect for LGPS employees reaching state pension age up to April 2021. Further guidance will be published by the Government once there is a more definitive stance on the impact after April 2021.
In 2015 the Government introduced reforms to public sector pensions and as a result the majority of public sector workers were moved into new defined benefit pension schemes, with a large portion being moved into the Cabinet Office’s “alpha pension scheme”, which provides a defined benefit worked out on a career average basis meaning that a pension is built up on a percentage of earnings in a given year. The schemes that many younger judges and firefighters were enrolled into came with “transitional protection” whereby the value of historic benefits accrued are protected. It has since transpired that this scheme was not as good as equivalent schemes for older workers. The Court of Appeal therefore ruled in the McCloud case December 2018 that this amounted to unlawful discrimination.
As a result of this, there may be a significant increase in the pension liability of organisations within such schemes, especially those with a younger workforce. This is expected to cost the Treasury billions, and employers could therefore be forced to increase current contributions or make lump sum payments to fund shortfalls, although details of how the deficit is made up has not been made available yet.
While the above rulings do not affect the cash position of an organisation, the forthcoming changes to the employer contribution rate of the Teachers’ Pension Scheme following its revaluation at 31 March 2016 will have an adverse impact on cash payments and accurate budgeting will become even more crucial over the next few years.
The employer contribution rate increased to 22.8% from the current 16.48% from 1 April 2019 for a period of four years. The Department for Education has agreed that the revised rate will only be implemented from 1 September 2019 with the new contributory rate for employers being 23.6% (to make up for the six month lag).
Across the education sector, this increase is expected to cost £1.1 billion in 2019-20, of which around £80m is expected to impact the further education sector, and state-funded schools a further £830m. An open consultation period was commissioned to gauge the response in the sector and the results, published in April 2019, confirmed that the government will fund both further education colleges and schools for their respective 2019/20 financial years. But, their position for the funding of the 2020/21 financial year and beyond remains unclear.
The government have also confirmed that they will not fund independent schools, Universities and other organisations providing higher education, although a consultation, which closed on 3 November 2019, proposes that independent schools are allowed to make phased withdrawals from the scheme.
For those employers operating defined contribution schemes, the minimum level of pension contributions under the auto-enrolment legislation increased to its full level from April 2019. While the Government has not officially announced any further planned contribution changes, this could happen in the future with most people currently likely to have a shortfall in retirement income.
As well as the rise in contribution levels, many changes have occurred since auto-enrolment was initially introduced in October 2012.
These changes include but are not limited to:
In the first two quarters of 2019 alone, as a result of country-wide auto-enrolment inspections instigated by the Pensions Regulator, 74% of the checks identified a breach in the legislation, with 76% of these resulting in enforcement action being taken. (Source: The Pension Regulator’s Compliance and enforcement quarterly bulletin April – June 2019).
With these points in mind, employers should aim to keep abreast of new auto-enrolment legislation changes in these areas and we would suggest that this is a good opportunity for employers to reassess their pension arrangements to ensure both compliance and best practice are met.
Regardless of sector, all organisations are encouraged to plan ahead with their budgeting and financial management in order to continue meeting day-to-day operational needs while also meeting their longer term pension obligations, especially in an increasingly uncertain UK political and economic climate.
Click here for further information on how Buzzacott Financial Planning can help with your auto-enrolment review.
Want to speak to an expert?
If you have a query relating to pensions, send through your enquiry below and one of our experts will be in touch.
Then you enrol them and pay minimum contributions on their behalf.
We understand this kind of system takes time and insight to manage. So if you’re a new employer, we can help you choose and set up the right scheme for your organisation. And if your resources are stretched, you can outsource your auto-enrolment, payroll and pension scheme admin to us. Or simply use us as add-on consultants whenever you need to.
We’ve been helping employers with auto-enrolment since 2012 – ranging from limited liability partnerships and religious institutes to SMEs, sole traders and not-for-profit organisations.
Work with our financial planning team to audit your auto-enrolment processes and check they’re doing what they should. We can make sure you comply with legislation, help you avoid risk and recommend best practice in these areas:
Our service scales to provide just what you need – from admin support and employee communications to ongoing, up-to-date advice.
