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The Big Pension Changes For 2018

We’ll all be paying more into the pension pot next year. From April 2018, employers’ contributions will rise from 1% to 2%, whilst employee contributions will increase from 1% to 3%.

In the long term, the rise will have a positive effect on pensioners, but it comes with increased costs in the medium term. Here, we explore the pension changes in a bit more detail, revealing why the rises have occurred and how you can expect the price hikes to affect you.  

 

Why the changes?

Since the introduction of automatic enrolment, it has become compulsory for employers to offer a pension scheme to employees (by 1st February 2018 latest). Staff who opt-in must place a particular amount of money into their pension pot each month, with their employer also compelled by law to make their own donation. 

This system is designed to protect the pensioners of tomorrow – and also dictates that the minimum pension contributions increase year on year. From April 2018, staff will need to put at least 3% into their pot, whilst their employer will be required to make 2%. That’s a total of 5% (up from 2% on the 2017/18 financial year).

Whilst pension contributions have increased by 3% overall, average earnings have only risen by 2%. Ultimately, a lot of people are going to be earning less money throughout 2018 than they did this year, but will be told to put more in their savings fund for the future.

 

What does this mean for me?

The rise in employer pension contributions ultimately means that businesses will have less money to play around with in their budgets from April onwards.

Sufficient preparation is required to prevent the increases from causing financial headaches later down the line. A tight control on pension contributions is essential to maintain healthy cash flow, and budgeting accordingly as soon as possible puts you in the best position to keep your business ticking over nicely. 

It’s also in your best interests to educate your staff on the changes coming into play, as many of them may not be aware of the pension boosts (meaning they may question the total income displayed on their payslips).

For more information on pension contributions and auto enrolment, you can visit The Pensions Regulator site.

 

Enjoy the best financial support from Nabarro Poole

New rules and regulations can complicate your balance sheet – forcing you into necessary recalculations across the board. This is where an accounting team can prove so beneficial.

The specialists here at Nabarro Poole can help you prepare for 2018 with advanced account management solutions and relevant business guidance, ensuring you remain on top of your books right from the very beginning.

Get in touch with our team today on 0161 998 4276 and arrange a consultation completely free of charge. You can also leave us a message using our contact form

5th of January 2018




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The Big Pension Changes For 2018

We’ll all be paying more into the pension pot next year. From April 2018, employers’ contributions will rise from 1% to 2%, whilst employee contributions will increase from 1% to 3%.

In the long term, the rise will have a positive effect on pensioners, but it comes with increased costs in the medium ...