It is vital that small employers understand the implications now and in the future in their choice of workplace pension schemes. There is currently a great deal of discussion which pre-supposes that years down the line, employers could be sued for the wrong choice of auto enrolment scheme.
NEST, the Government backed pension provider, will offer a pension scheme to any business who applies to them and the Pension Regulator’s website provides a list of other pension scheme providers. But as an employer, are you aware that if an employee dies, their benefits from NEST’s scheme are paid out under a non-discretionary trust to the estate. This will trigger a 40% IHT charge. There could be a scenario where the estate sues the employer for not offering a workplace pension via a discretionary trust.
Another possible scenario which could result in litigation is where an employer has a number of zero hours employees who join a net pay scheme when they have enough earnings in one period but don’t earn enough in the tax year to pay tax. These employees aren’t benefiting from the Government incentive which they would have under a relief at source scheme and they will miss out on valuable addition to their pension pot.
So tread carefully in your choice of scheme. A regulated IFA or corporate pension adviser will help you make the right decision both for you and your employees.