On the 1st October 2012 the first round of employees will be automatically enrolled into qualifying workplace pension schemes or the Government back NEST (National Employment Savings Trust). Auto-enrolment has started with the UK’s largest employers with gradually smaller and smaller firms following suit over the coming months.
Whilst ensuring people save towards their retirement is to be encouraged; for some there are pitfalls to be aware of. Swindells Financial Planning, retirement and pension advice experts based in Sussex, highlight the following incidents where being auto enrolled could cost you potentially thousands in tax charges.
Protect your Protection
Anyone who has applied for and received “enhanced” or “fixed” protections (which protect assets that have, or potentially will, be in excess of the Lifetime Allowance) will lose this protection if they are automatically enrolled by their employer.
To preserve these protections employees must opt-out of the auto-enrolment into the pension scheme within 1 month.
Protect your Contributions
Those who made substantial contributions to their pension scheme could face tax charges if they are automatically enrolled into their employer’s scheme and further contributions are made on their behalf.
There is a risk the “Annual Allowance” (the limit placed on the amount of tax relievable pension contributions that can be made) will be breached resulting in tax penalties.
If you have any concerns regarding auto-enrolment or your pension and financial advice in general then please do not hesitate to contact Swindells Financial Planning on 01323 894 202, email email@example.com or by using our booking form below.