The Charity Commission has issued a reminder to charities about changes to the way people can access their pensions from April 2015.
From April, people with defined contribution pension saving, from the age of 55, will have much greater flexibility about the way they take pension savings. Options include taking out an annuity, taking all their savings as a single lump sum or leaving their pension funds invested and taking lump sums from time to time.
A quarter of each lump sum will be tax-free and any other funds taken out will be taxed at the saver’s marginal, or highest, rate of income tax – normally 20 per cent for most pensioners.
The pension reforms mean that some members of defined benefit pension schemes will also be able to benefit from the greater flexibility in accessing funds, by transferring their savings to a defined contribution scheme. This will apply to people in a private sector or funded public sector scheme.
The commission said in guidance issued in January: “Charities with staff in a defined benefit pension scheme should contact the trustee of the pension scheme or their professional adviser, to understand the implications to their charity should employees transfer out of the scheme.”
Many smaller charities will also soon need to implement auto-enrolment – the automatic enrolment of eligible workers into a qualifying workplace pension scheme.
Employers with fewer than 50 employees will start auto-enrolling from June this year and with auto-enrolment experts advising allowing at least six to nine months to prepare – which could include amending an existing pension scheme so that it is compliant or putting in place a scheme for the first time – some charities could find themselves with limited time to take the necessary steps.
Moore Thompson and our Independent Financial Adviser colleagues at MT Financial Management offer comprehensive services to help charities implement auto-enrolment, including:
- identifying the costs of auto-enrolment
- reviewing existing pension schemes for auto-enrolment compliance
- advising on and assisting with setting up a new, compliant auto-enrolment pension scheme
- payroll bureau support for auto-enrolment
- reviewing existing systems to help you prepare for auto-enrolment
- advising on and providing quotations for Sage software to assist with auto-enrolment and accounting.
For more information on our auto-enrolment services, please contact us.