With the end of the 2023/24 tax year coming up on 5 April, now is your final chance to take advantage of annual reliefs and allowances.

Annual allowances

There is no limit on how much you can pay into your pension pot, however, there is a limit on how much you can pay tax-free.

All the pensions that you pay directly and any pensions that are run by your employer all count towards this threshold.

Combined, you can put up to £60,000 into a private pension each tax year without paying tax.

Salary sacrifice and pension contributions

If your income is just above the higher or additional rate Income Tax threshold, you may want to make use of a salary sacrifice scheme.

This is offered by some employers where your pension contributions are paid directly from your earnings.

By doing this, you reduce your taxable salary. As a result, you will pay less Income Tax and National Insurance, and even reduce your Income Tax threshold.

Threshold income vs adjusted income

Your income can affect your tax allowances and reliefs, as they are applied on a tapered scale using two measures.

These are your threshold income, which is your income excluding pension contributions, and your adjusted income, which is your income including pension contributions.

Your pension contribution allowance decreases if your threshold income is over £200,000 and your adjusted income is over £260,000.

You can calculate your pension allowance using HM Revenue & Customs (HMRC) guidance.

Accessing your pension

Your tax-free threshold may also be reduced if you access your pension pot. This includes taking cash or a short-term annuity from your pension on a flexible basis.

It is best to check with your pension provider whether the flexibility of your pension will affect your tax obligations.

With this type of pension, you are only able to put in £10,000 for the current tax year.

Lifetime Allowance

In April, the Government will be abolishing the Lifetime Allowance (LTA) on pensions. Under the previous legislation, you paid tax on pensions savings above £1,073,100.

The new legislation introduces two new systems for taxing pensions. The Individuals Lump Sum Allowance (LSA) will be set at £268,275 and the Individual Lump Sum and Death Benefit Allowance (LSDBA) is to be set at the same rate as the LTA.

This is another thing to consider when planning your pension.

Reaching the allowance

Once you have reached the £60,000 allowance, paying more into your pension pot can create a tax liability.

There are other options available to you to help improve the tax efficiency of your income. These include:

• Paying into an ISA
• Making a gift from your salary to a charity
• Asking your employer if they offer a salary sacrifice scheme – although this will only affect future tax years.

Paying into your pension is a great way to plan your future whilst reducing your tax obligations in the present.

It is best to make use of your £60,000 allowance before the end of the tax year if you haven’t already.

For help on your pension contributions and tax planning, speak to a member of our team today.

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It is essential you understand maternity pay and how to successfully incorporate it into your payroll to benefit both you and your employees.

You might feel uncertain about maternity pay and what your obligations are, but we are here to help you navigate the process and ensure you payroll successfully.

Statutory maternity pay

Statutory maternity pay (SMP) is paid to an employee by an employer and is payable for up to 39 weeks.

Your employee, however, is entitled to a maximum of 52 weeks leave.

By using the Payroll Manager software (recognised by HMRC), your employee will quickly know if they are entitled to SMP based on automatic calculations.

If you do not have this software, you should seek expert advice using our friendly team by getting in touch today.

The amount of SMP your employee will get is based on how long they have worked for you and how much they are paid.

Roughly, their average weekly pay should be above £123 (for 2023/24) and they should have worked for you 26 weeks prior to the qualifying week (the qualifying week is 15 weeks prior to the expected birth date).

SMP is payable at 90 per cent of the employee’s average weekly pay for six weeks and then at a rate of £172.48 (for 2023/24) or 90 per cent of the average weekly wage (whichever figure is lower).

It is important your employee informs you of the date they wish their leave to begin and how many weeks maternity leave they wish to take.

They should also provide you with a MAT B1 form; this is medical evidence of their pregnancy and helps you to payroll their maternity pay properly.

Enhanced maternity pay

As well as offering SMP, you might also offer your employees ‘enhanced’ or ‘contractual’ maternity pay.

For example, your employee might get 26 weeks of full pay followed by 13 weeks of SMP.

As their employer, you need to ensure your employees’ contract reflects the conditions of enhanced maternity pay.

These include:

• If your employee is entitled to enhanced maternity pay
• The amount of pay they will get
• How long they get it for

If you choose, you can pay more to your employees but you need to make sure your payroll reflects this.

Offering your employee enhanced maternity pay might mean they have to repay some or all of the enhanced amount (which is anything more than SMP).

Reasons might include:

• If they do not return to work
• If they leave shortly after maternity leave

It is important you set out these regulations to your employee as this could have a significant impact on your payroll if you don’t.

Employer pension contributions whilst on maternity leave

Your employee could be a member of a workplace pension scheme, which can add challenges to your payroll.

As their employer, you should still pay pension contributions based on their pensionable earnings before they go on their maternity leave.

Make sure you seek advice to pay your obligations successfully as this could impact both your payroll and your employee.

You must gain a clear understanding of how to correctly payroll maternity pay to ensure a period of rest and development is available for your employees.

Every situation is unique and so you must seek tailored financial advice to ensure there is specialised financial support for your employees.

If you would like to discuss maternity pay with an expert, contact us now.

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Recent figures highlighted that unclaimed pensions amount to an astonishing £28,000 per person.

As a business owner, it is imperative to help your employees in securing what belongs to them.

The Pension Tracing Service has indicated that the total amount in unclaimed pensions extends to millions of pounds, a sum that could substantially strengthen your employees’ financial stability during retirement.

Empowering your team with knowledge

Initiate a campaign to enlighten your team regarding unclaimed pensions and the procedures it takes to trace them.

Encourage proactive steps in discovering any unclaimed pensions they might have.

Guidance in pension tracing

Support your team in navigating pension tracing by promoting the utilisation of the Pension Tracing Service, a complimentary free facility aiding individuals in finding their misplaced pension schemes.

You can further this by allocating appropriate resources and raising awareness of this service.

Foster a supportive environment

Foster a nurturing environment where discussions on pension-related topics are encouraged.

Encourage your staff to exchange experiences and advice on tracking down their unclaimed pensions.

Advocate regular updates

Persuade your team to regularly update their details with their pension providers, including alterations to their address, marital status and other personal information.

This habit will aid in easy contact with pension providers, diminishing the probability of unclaimed pensions.

Recent updates on pension policies

HM Revenue & Customs (HMRC) has publicised that starting from the 2024/25 tax year, individuals earning below £12,570 and not receiving tax relief will receive taxable pension contributions directly from HMRC at the end of the financial year.

As of 6 April 2023, the annual allowance to contribute to pensions rose to £60,000, with the eradication of the lifetime allowance.

The upper limit for pension lump sums has been capped at £268,275.

If individuals have protection from the previous lifetime allowance reductions can maintain their protected lump sum, with surpluses being taxed at the marginal rate instead of 55 per cent.

These modifications cover all pension allowances, inclusive of personal pensions such as SIPPS, extending beyond just workplace pensions.

In your role as an employer, aiding your employees in locating their unclaimed pensions not only fosters financial stability but also nurtures trust and accountability in your business.

Start on this vital initiative today and assist your staff in reclaiming the pensions they are duly entitled to.

If you need assistance in tracing unclaimed pensions, get in touch today.

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The Budget focused primarily on economic growth, with an emphasis on motivating people to get back into work, particularly early retirees.

In response to this, the Chancellor declared major changes to pension allowances, hoping to encourage high-earners to remain in the workforce for longer.

Key pension changes from the Spring Budget 2023:

• Pension Annual Allowances set to increase from £40,000 to £60,000
• Lifetime Allowance to be removed completely
• Money Purchase Annual Allowance set to increase from £4,000 to £10,000
• Tapered Annual Allowance to be updated

Pension Lifetime Allowance

Lifetime Allowance (LTA) represents the total amount you can accumulate in all your pension savings throughout your life without incurring a tax charge when accessing them.

If your pension savings exceed the amount, you will be required to pay a tax charge on the surplus value, which is referred to as the “excess”.

The limit of £1,073,100 was set to last until 2026. However, the Chancellor announced the allowance would be scrapped completely.

The current allowance applies to private pensions and not the state pension.

The new change will come into effect from 6 April 2023 with the initial abolition of the LTA charge, before the allowance is scrapped entirely in the following year.

Pension Annual Allowance

The Pension Annual Allowance refers to the maximum amount an individual can contribute to their private pension each tax year without facing additional charges.

Currently, the limit is set at £40,000. The Chancellor announced that this would rise by 50 per cent to £60,000, starting on 6 April 2023.

Money Purchase Annual Allowance

Changes are also being made to the Money Purchase Annual Allowance.

This allowance is relevant for individuals who have begun to withdraw from their defined contribution pension, but who want to continue working and saving.

At present, the allowance stands at £4,000 per year before incurring a tax penalty. However, the Chancellor has more than doubled this amount to £10,000 and is effective from 6 April 2023.

This change could be useful for those who dipped into their pension to help subsidise their incoming during the pandemic or the cost-of-living crisis.

Tapered Annual Allowance

For higher earners, the tapered annual allowance may have affected their pension savings.

This allowance gradually decreases the amount you can contribute to your pension plan each tax year, based on your earnings.

The allowance would not be reduced to below £4,000. However, in the upcoming tax year, this lower limit will be raised to £10,000.

The adjusted income threshold for the Tapered Annual Allowance will also be increased from £240,000 to £260,000 from 6 April 2023.

The Spring Budget introduced noteworthy pension changes aimed at motivating older individuals to remain in or re-enter the workforce.

The changes have the potential to impact a significant portion of the population. However, the exact number of people who will benefit remains uncertain.

Need advice on your pension contributions? Get in touch with our team today.

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It comes after regulations were laid in Parliament this week, paving the way for Government approval.

Under existing laws, all pensions are either Defined Benefit (DB), which is linked to salary or length of service, or Defined Contribution (DC), based on how much is paid in by the employee.

But the new CDC pension scheme will allow both the employer and employee to pay into a collective fund, with pensions paid out from this shared pot.

This could offer businesses predictable costs and protection against economic shock, such as that caused by the coronavirus pandemic.

Royal Mail and the Communication Workers Union are expected to be among the first to switch to a CDC scheme when it gains approval.

The latest research, meanwhile, suggests that one in five (21 per cent) businesses would be interested in exploring CDC schemes for their own companies.

Commenting on the new scheme, Minister for Pensions, Guy Opperman, said: “I am very pleased that these schemes will soon be able to operate in Great Britain.

“We have seen the positive effect of these schemes in other countries – and it is abundantly clear that when they are well-designed and well-run they have the potential to provide a positive outcome for savers, and can be resilient to market shocks.

“I have no doubt that millions of pension savers will benefit from CDCs in the years to come.”

For help and advice with related matters, please get in touch with our team today.

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Publishing its recommendations, the Taskforce on Pension Scheme Voting Implementation (TPSVI) said the move will see “significant strides towards safer, better and greener pension schemes”.

It comes after the independent group, chaired by Simon Howard, the former CEO of the UK Sustainable Investment and Finance Association, was asked to assist with voting system issues.

Under existing regulations, pension scheme managers surrender their voting rights to vote at the Annual General Meetings (AGMs) of the companies they invest in when pension funds are invested in pooled funds.

It means the majority of asset managers “have not always been prepared to engage with their clients’ voting preferences”, such as climate risk management, diversity, or pay.

But the recommendations, if accepted, would give greater powers to asset managers, potentially leading to more ethical and greener pension schemes.

The three main recommendations are:

1. That pension scheme trustees should either set a voting policy of their own, or explicitly accept responsibility for those policies exercised on their behalf by their asset managers
2. All asset managers are to offer asset owners the opportunity to set an “expression of wish” as to how votes are exercised on their behalf, regardless of how they invest
3. The Financial Conduct Authority (FCA) should clarify that there is no breach of fund rules in acting on an expression of wish; and set expectations of asset managers for better disclosure of voting policies, more granular and comparable reporting of how votes are cast, and more comprehensive explanations for those votes.

Commenting on the report, Minister for Pensions and Financial Inclusion Guy Opperman said: “This is about giving pension savers a voice in how their hard-earned savings are being looked after.

“I see no reason why trustees shouldn’t be able to determine their own high-level policies – on areas such as climate risk management, diversity, or pay – and find an asset manager to implement it.”

Mr Howard added: “Our recommendations will give asset owners – such as pension schemes – a louder say in voting in pensions.

“There are two principal goals. First; by boosting the owner’s voice and influence over their agents we can ensure that the whole system works to better guide investee companies.

“Second; we will let the people paying into pensions know that their views are being considered, boosting the support pensions saving will receive. Both are necessary for better pension outcomes.”

Click here to access the TPSVI report.

For help and advice with related matters, please get in touch with our team today.

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