Great News for IFA’s Wishing to Enter the Corporate Market

Great News for IFA’s Wishing to Enter the Corporate Market

In 2012 the government’s latest pensions “initiative“, the Personal Account, was due to be launched. The personal accounts scheme is being created to provide an allegedly low-cost, “independent”, workplace pension scheme that any employer can use. It aims to provide access to workplace pension saving to millions of people – typically those on low to middle incomes.
This so far has attracted very little apparent interest from employers. For SME owners who employ staff the Personal Account is set to be an administrative, and possibly, financial disaster. Employers will be compelled to offer a pension scheme to all employees run along bureaucratic lines from that date. It will be run by a “not for profit” Trust Company, allegedly independent but reporting to Parliament. Not for profit does not mean inexpensive fees of course! The Personal Accounts Delivery Authority (PADA) is in trouble over obtaining sufficient competition for the role of supplier of personal accounts in 2012.

The Chief Executive Tim Jones has said “the authority remains very confident we will have a strong competition for the final contract” this is a difficult statement to accept as even at this stage describing the continuing process as “a  strong competition” with only two horses left in the race is pushing it a bit.

It is critical that the right decision is found. We have seen through the tax credits fiasco how much misery can be caused by bad administration. With only the Indian firm Tata left, it is a one horse race now. The disconnect between Pada’s only objective (to deliver the product) and the government’s constant meddling with pensions is becoming increasingly obvious” he says.
It is frightening that the long term provision of pension benefits is left to the fugacious political whim of a small group of people that has a separate and well funded retirement promise.
Clearly one of the major problems that potential suppliers have, is the potential for people to opt out of the scheme (and they have to opt out rather than be opted in) is that suppliers have no idea of the amount of money that they may make from the scheme and whether the whole thing will become an administrative nightmare.

Employers will be able to choose to use the personal accounts scheme or another qualifying workplace pension, for example:

  1. Where an employer makes contributions on the minimum band of earnings required by the Pensions Act 2008, an 8 per cent contribution for an average earner (approx £25,100) would be approximately £1,600 per annum
  2. Alternatively, an employer might choose to make contributions on a broader band of earnings, for example by basing them on the first pound of pay. In this case an 8 per cent contribution for an average earner (approx £25,100) would be approximately £2,000 per annum
  3. Transfers in and out of the scheme are banned (except in some special circumstances, such as retirement).

All in all for the IFA’s this is a golden opportunity to enter the corporate market. All companies are affected. No one can say “no” to providing a pension scheme, and the other opportunities to sell IHT, Pensions and shareholder /director protection are more favourable than for many years in our opinion.

If you wish to find out more contact us. We do not offer financial advice but are able to advise you of tax efficient ways to help you build a practice with a difference and your clients meet their obligations.

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