Mandatory workplace pension enrollment - opting out

[unclemark123]

Please forgive my limited knowledge on this. I had a letter through a while back saying that as an employer we must enrol our employees.

Here's our situation:

Wife: Director & employee of ltd co.
Me: employee of same company

Neither of us wants to enrol, or contribute. We have other retirement arrangements. The letter and my accountant advised that we must enrol, so I enrolled with NEST at the weekend. Can I simply opt out as per the 1 month period and draw a line under it now?

Mark.

[JulianPH]

Hi Mark

I believe Directors have an exemption and yes, you can opt out now and have done with it in any event.

Do remember that on every three year anniversary employees have to be opted back in (and can then opt back out again) under the legislation.

As your accountant about Director exemptions.

Cheers

[PurpleMoonlight]

Is your PAYE income from the Ltd more than £10,000 pa?

[Eric Mc]

The Pension Regulator website states categorically that SINGLE DIRECTOR companies don't need to set up a scheme.

If there is more than one director but no employees, then they MAY have to set up a scheme IF there are any contracts of employment in place between the company (employer) and the director(s).

They do not attempt to explain what they mean by a "contract of employment" but instead point you in the direction of HMRC's definition of employment contracts.

[unclemark123]

Eric Mc said:

The Pension Regulator website states categorically that SINGLE DIRECTOR companies don't need to set up a scheme.

If there is more than one director but no employees, then they MAY have to set up a scheme IF there are any contracts of employment in place between the company (employer) and the director(s).

They do not attempt to explain what they mean by a "contract of employment" but instead point you in the direction of HMRC's definition of employment contracts.

Eric, Gents,

So to be clear, my wife is the only director, and an employee, and I am the only other employee, so we do not need to be a part of the scheme?

[Jockman]

unclemark123 said:

Eric, Gents,

So to be clear, my wife is the only director, and an employee, and I am the only other employee, so we do not need to be a part of the scheme?

Why is your wife an employee ?

[unclemark123]

Jockman said:

Why is your wife an employee ?

As the sole director she is paye, and takes dividends.

[Jockman]

unclemark123 said:

As the sole director she is paye, and takes dividends.

Does that make her an employee? Surely she is an office holder, not an employee?

[unclemark123]

Jockman said:

Does that make her an employee? Surely she is an office holder, not an employee?

Not sure Jockman. It was all set up under the advice of my accountant.

[Jockman]

Mark the answer may well lie in Eric's post above - he is an accountant. Your wife is a director. Do you need to be in the company? If so would if be beneficial for you to be a director too?

[Jockman]

http://www.thepensionsregulator.gov.uk/docs/detail...

See section 29 and adjust the company accordingly.

[Ozzie Osmond]

Let's get this straight,

• Directors manage the company and may or may not be employees.
• Shareholders own the company and receive dividends. They are not necessarily directors or employees, but often are.

It is not unusual for private companies to pay their director(s) just enough employee salary to keep them below the National Insurance threshold. Further cash is likely to be paid out in the form of dividend. Many small private companies will be juggling things to keep the directors/shareholders/spouses out of National Insurance and out of higher rate Income Tax.

AFAIK your wife cannot be exempt a "single person director" if her company has ANY other worker(s), including you. Sounds as though you need to get it sorted with your accountant because you may well have two relevant people, one director and one employee.

...and there's also the £10,000 PAYE point raised by Purplemoonlight above.

[Eric Mc]

Ozzie is correct.

A director is only an "employee" if an employment contract exists between the employer (the company) and the director.

It will ALWAYS be assumed that an employment contract exists between an employer and an employee

What the Pension Regulator gives no advice on at all is how you construe whether an employment contract exists. A contract can exist in law even if no paper or even verbal agreement has been made.