to think these Employer Pension rules shouldn't apply to single employees?

[BCBG]

Or am I missing something? DH and I employ someone 32 hours a week to help me at home and pay all tax, NI etc and always have done. The letter re setting up an Employer's Pension Scheme arrived today. I agree with the principle behind getting everyone to focus on their retirement needs but AIBU to think that the main beneficiary from this will be pension providers? In our case, our employee will probably work for a further two years or so; less if we move away next year. There must be a cost to setting up and administering a scheme which in a couple of years will not be required (we will no longer employ anyone; she may or may not take on caring responsibilities elsewhere).
The parallel that springs to mind is that back in 1997 I left a job, complete with £900 invested by that employer in a personal Pension Scheme on my behalf. A few weeks back, due to the closure of Capita's admin business I managed to transfer my 'pot' to a new provider. Value? A measly £945 after eighteen years of investment. Everything else by way of capital growth has been eaten up by admin fees. To my way of thinking, that means that basically the pension company profited from any growth possible, leaving me with less money than if I had simply taken the £900 myself and shoved it into a PEP (now ISA). I cannot for the life of me see that my single employee will benefit at all from this change in legislation, but I'm willing to bet that an entire industry will make money. AIBU?

I thought you meant single as in unmarried....

But yes I agree with you. I employ a part time nanny and because of the different start times for this scheme I will have to start contributing a full year before my company with a £6m turnover and 30 staff will have to start doing the same. And all out of my taxed income afaik.

Bump?

I don't think an entire industry will make money from your contributions for a single employee.

YABU for complaining when you don't even know if there's a cost to setting it up and administering it.

Assuming you're talking about Auto Enrolment, AFAIK you can use NEST and your employee's small pot will follow her when she leaves in two years (or less if you move away next year).

it shouldn't cost you anything to set up - use Nest and she will be able to continue contributing to it in future jobs.

have a look on the pension regulators website.

Ok that sounds like I actually am BU but it's not the cost of setting up that is an issue as I imagine that is pretty negligible - it's the on going fees that I am asking about - the little pot I mentioned was eroded twice a year by admin fees and management fees and sale of shares to pay said fees - and I did refuse to add to the pot because the performance was diabolical - so she can take her 'small pot' but she's already said she is going to look after her grandson if we move rather than get another job, and she's ten years or more off retirement age so I can't see that it will help her much. But what there is must attract charges somewhere

I think in the generality of cases YWBU as pp explain about transferability.

However I think there is an issue if you and your employee know she will not contribute beyond 2 years and you only contribute the minimum requirement, as you outline. Am I wrong in thinking you and your employee can agree an opt out? You could financially compensate her for contributions foregone.

Aren't these new compulsory pensions more flexible and you can pay into them from different employers?

I work on projects so I move jobs fairly frequently. I have consolidate several small pensions into one larger pot. Not all pensions are eroded badly by fees, I know this was the case with some pensions in the past (including one I had) but I think that most pensions offer a lot better value in terms of fees etc than they did 10-15 years ago.

Food for thought. I hadn't thought about transferability in general although no, that won't apply to her particular circumstances I suspect. And yes I think fees generally have improved from the frankly sharp practice of the provider I would love to name but can't that is now defunct. So I guess I ABU! Think she will opt out as she doesn't want any deduction on her part from her small income and the very small percentage that we would have to pay in employer contribution can be given to her directly I think. The only question I have to resolve is if she can legally opt out before we create the scheme from which she will be opting out, which from my initial reading of the paperwork it seems to say we have to set up first. I suppose my last observation is that I think this will drive some of these jobs away - after 15 years of employing someone to do this role (fully taxed etc in each case) the paperwork is just too much for me especially now that the simplified deductions card is no more and I have to manage her tax online as though I had more than one employee. With this on top it's just too much so when we move I think we won't replace her. First world problem, I know.

But your employee will presumably work for someone else in the future? It is their pension not yours.

As for your £900 why did you leave it sitting there for years? I transferred some old pots in to a SIPP and there are other options.

If you have an employee you have to administer a scheme, even if your employee opts out

I think yabu single employees are equal in their need for a pension to everyone else surely?

Yes you have to set up the scheme regardless if she opts out. Also you cannot be seen to induce an employee to opt out of the scheme by rewarding them in some way. If you pay your employee with the money you save through not paying her contributions this counts as an offence as you are encouraging them to opt out.

The main reason your employee may choose to remain the pension scheme, even though they aren't far off retirement, is for the employer contributions. It is essentially 'free money' that is going towards their retirement.

Also worth adding is the new pension freedoms. These changes to how you can take your money mean that pensions have become more attractive as a savings vehicle. Your employee may wish to take their pension pot as a cash lump sum. Or take the tax free part only.

OK, I get all that - ( and I am really grateful for the responses as I find your answers so much clearer and to the point than the bumf) - but there is no question of me inducing her to opt out. Her DH is a local IFA so she is well advised and she has been telling me that she doesn't want to make any contributions since the subject first arose - whereas I have already explained that we will have to set it up any way as far as I can see. She earns very little (she is my cleaner, for info) but we have always paid her tax and NI rather than cash in hand which is the way most people pay their cleaners round here. The reality is that if and when she leaves us (when we move) she is most likely to just look after her grandchild, but otherwise she will just pick up another cleaning job if she can and that will quite probably be cash in hand. She is an employee because many years ago we decided to treat the role properly, rather than turn a blind eye and pretend she was 'self employed '.

You have a cleaner for 32 hours a week?

Have just looked at the NEST charging structure and my original point remains - there will be lots of small single employee pots like this one that will be set up without any great return (due for example to age at startup) (and our employer contribution will have to be made out of taxed income), then there will be hers, and NEST or any other provider will obtain an AMF. Granted the majority of employees should be able to build a pension and move it around, but I still maintain my view that this new legislation will be an income stream for providers without necessarily providing a return equivalent to prudent savings and investment to all the minnows that get swept up into it. If it makes employing a cleaner legally too expensive, then she will be redundant, simple as.

Errin, yes, for personal reasons she comes in every day. Does it matter?

I am not convinced the small pots are much of an income stream for providers these days. Changes in legislation mean that the annual management charges are now capped, but providers still have to provide the same compliance documents and service to someone with a £900 pot as they do to someone with a £900,000 pot. Many providers have avoided taking on smaller company schemes as they are simply not profitable and frankly more trouble than they are worth.

Also the cost of setting up the scheme and ongoing administration costs levied by the provider are now charged to the employer with a small annual fund charge on the employees plan. This is to avoid the situation like your old policy where any growth was wiped out by high charges.