Under the Pensions Act 2008, every employer in the UK must enrol specific staff into a pension scheme and contribute towards it. This workplace pension is designed to provide employees with savings for their retirement via mandatory work-based pension schemes arranged by their employer.
It is important to be aware that it doesn’t just apply to businesses; if you employ someone directly to work for you, for example a cleaner, nanny or personal care assistant, then you are an employer and will need to ensure that any eligible employees are enrolled into a workplace pension. Conversely, if you have used an agency to hire the person and the agency pays their national insurance contributions, the agency is the employer and you don’t need to do anything.
When does it come into effect?
The automatic enrolment process started in October 2012, with all employers being obliged to offer a workplace pension scheme by a specific mandatory enrolment date. These staging dates have been staggered for different sized employers, with the largest companies (those with over 120,000 employees) being required to comply from 1 October 2012 to new employers (where income is first payable between 1 July 2017 and 30 September 2017) being required to comply by 1 February 2018.
The Pensions Regulator – a public body set up by the UK government to regulate work-based pensions – will be communicating with all employers to let them know when their legal duties start. In the meantime, please refer to the Pensions Regulator website to check the exact staging date for your business: www.pensionsregulator.gov.uk.
Employers must comply with the regulations by their set staging date to avoid receiving a fine for non-compliance.
Who qualifies?
Automatic enrolment only applies to employees fitting all of the following criteria:
Employers cannot deny staff who are ineligible under the above criteria if they wish to be enrolled. Where an employee earns less than either £112 per week, £448 per four weeks or £486 per month, employers are not required by law to contribute to their workplace pension.
How much must each party contribute?
The government have set minimum levels of contributions that must be paid to the pension scheme by employer and/or employee. Like the enrolment date, there is a staggered scale setting out the minimum contribution, which continues to increase each year until April 2019.
The exact dates for the increase are subject to government approval and therefore may change. The government will also pay into the pension pot by giving tax relief on the employee’s contributions. If the employee is a higher-rate taxpayer, he/she can receive further tax relief on contributions, but this needs to be actively claimed through via a tax return.
It is important to be aware that it doesn’t just apply to businesses; if you employ someone directly to work for you, for example a cleaner, nanny or personal care assistant, then you are an employer and will need to ensure that any eligible employees are enrolled into a workplace pension. Conversely, if you have used an agency to hire the person and the agency pays their national insurance contributions, the agency is the employer and you don’t need to do anything.
When does it come into effect?
The automatic enrolment process started in October 2012, with all employers being obliged to offer a workplace pension scheme by a specific mandatory enrolment date. These staging dates have been staggered for different sized employers, with the largest companies (those with over 120,000 employees) being required to comply from 1 October 2012 to new employers (where income is first payable between 1 July 2017 and 30 September 2017) being required to comply by 1 February 2018.
The Pensions Regulator – a public body set up by the UK government to regulate work-based pensions – will be communicating with all employers to let them know when their legal duties start. In the meantime, please refer to the Pensions Regulator website to check the exact staging date for your business: www.pensionsregulator.gov.uk.
Employers must comply with the regulations by their set staging date to avoid receiving a fine for non-compliance.
Who qualifies?
Automatic enrolment only applies to employees fitting all of the following criteria:
- Aged between 22 and state pension age
- Earning at least £10,000.00 per year
- Working in the UK.
Employers cannot deny staff who are ineligible under the above criteria if they wish to be enrolled. Where an employee earns less than either £112 per week, £448 per four weeks or £486 per month, employers are not required by law to contribute to their workplace pension.
How much must each party contribute?
The government have set minimum levels of contributions that must be paid to the pension scheme by employer and/or employee. Like the enrolment date, there is a staggered scale setting out the minimum contribution, which continues to increase each year until April 2019.
- For an employer, this begins at 1% of an employee’s qualifying earnings rising to 3% by April 2019
- For an employee, this begins at 0.8% of an employee’s qualifying earnings rising to 4% by April 2019
The exact dates for the increase are subject to government approval and therefore may change. The government will also pay into the pension pot by giving tax relief on the employee’s contributions. If the employee is a higher-rate taxpayer, he/she can receive further tax relief on contributions, but this needs to be actively claimed through via a tax return.
Practice one
Practice location – this expense-sharing practice was established over 40 years ago and is owned by three principal dentists. Situated within a large town in the Midlands, the practice is immediately adjacent to a health centre with an adjoining access corridor. There is plentiful free parking on site and easy access to the major road network.
Type of practice – this large NHS practice has eight surgeries, one of which is used for oral surgery. Alongside the three owners, income is generated by three associates, an oral surgeon, two therapists and two hygienists. The freehold premises, worth c.£200,000 was owned by the partners who were open to options with regards selling or retaining the premises.
Financials – the vast majority of turnover is delivered through a GDS-NHS contract worth £1,135,000 for provision of 43,000 UDAs. In addition, there was an oral surgery PDS contract for £90,000. The total annual turnover of £1,277,000 included approximately £52,000 private fee per item income.
Buyer appetite – this highly sought after practice was sold to one of our premier tier buyers. The location within the Midlands attracted a high level of interest and multiple offers were received.
Reason for sale/incoming purchaser – the partners were moving towards eventual retirement; however, they all expressed a desire to continue working at the practice post sale. The incoming buyer owned multiple practices within the locality and was purchasing as an investment opportunity.
Price achieved – £2,685,000 inclusive of goodwill, equipment, fixtures/fittings and freehold.
Practice location – this expense-sharing practice was established over 40 years ago and is owned by three principal dentists. Situated within a large town in the Midlands, the practice is immediately adjacent to a health centre with an adjoining access corridor. There is plentiful free parking on site and easy access to the major road network.
Type of practice – this large NHS practice has eight surgeries, one of which is used for oral surgery. Alongside the three owners, income is generated by three associates, an oral surgeon, two therapists and two hygienists. The freehold premises, worth c.£200,000 was owned by the partners who were open to options with regards selling or retaining the premises.
Financials – the vast majority of turnover is delivered through a GDS-NHS contract worth £1,135,000 for provision of 43,000 UDAs. In addition, there was an oral surgery PDS contract for £90,000. The total annual turnover of £1,277,000 included approximately £52,000 private fee per item income.
Buyer appetite – this highly sought after practice was sold to one of our premier tier buyers. The location within the Midlands attracted a high level of interest and multiple offers were received.
Reason for sale/incoming purchaser – the partners were moving towards eventual retirement; however, they all expressed a desire to continue working at the practice post sale. The incoming buyer owned multiple practices within the locality and was purchasing as an investment opportunity.
Price achieved – £2,685,000 inclusive of goodwill, equipment, fixtures/fittings and freehold.
Practice two
Practice location – established for approximately 35 years, this practice was purchased by the current principal in 2001 as a going concern. It is located within a popular tourist village in a rural area. The main shopping and parking facilities are just a short walk away.
Type of practice – the practice is predominately private and has two expense sharing partners who operate one surgery each and generate all of the income. The leasehold premises are located above a retail unit on the first and second floors, with no expansion opportunities available within the current footprint.
Financials – the annual turnover of £207,000 is derived from the outgoing expense sharing partner. The turnover is made up from 60% capitation, 35% fee per item and a £10,000 NHS contract consisting of 450 UDAs. Both staff costs and rental costs are minimised through the expense sharing arrangement, allowing the practice to generate a higher than average net profit.
Buyer appetite – the practice was marketed to our general market buyers. Due to the rural nature of the area buyer demand was lower than typical seen in other parts of the country; however, a buyer was quickly sourced and the practice sale completed within a nine-month period.
Reason for sale/incoming purchaser – the vendor was looking to retire and was flexible with regards working at the practice post sale. The incoming purchaser was a firsttime buyer looking to work within the practice full time.
Price achieved – £245,000 for the goodwill, equipment, fixtures and fittings.
Practice location – established for approximately 35 years, this practice was purchased by the current principal in 2001 as a going concern. It is located within a popular tourist village in a rural area. The main shopping and parking facilities are just a short walk away.
Type of practice – the practice is predominately private and has two expense sharing partners who operate one surgery each and generate all of the income. The leasehold premises are located above a retail unit on the first and second floors, with no expansion opportunities available within the current footprint.
Financials – the annual turnover of £207,000 is derived from the outgoing expense sharing partner. The turnover is made up from 60% capitation, 35% fee per item and a £10,000 NHS contract consisting of 450 UDAs. Both staff costs and rental costs are minimised through the expense sharing arrangement, allowing the practice to generate a higher than average net profit.
Buyer appetite – the practice was marketed to our general market buyers. Due to the rural nature of the area buyer demand was lower than typical seen in other parts of the country; however, a buyer was quickly sourced and the practice sale completed within a nine-month period.
Reason for sale/incoming purchaser – the vendor was looking to retire and was flexible with regards working at the practice post sale. The incoming purchaser was a firsttime buyer looking to work within the practice full time.
Price achieved – £245,000 for the goodwill, equipment, fixtures and fittings.
Practice three
Practice location – located within a coastal town in east England, this long-established practice was acquired by the current vendor in 1986. The practice occupies a converted end-terraced property within a residential area, on a busy main road. There is free on-site parking available and excellent transport links.
Type of practice – this is a four-surgery, mixed practice with two associates and two hygienists delivering income alongside the principal. The freehold premises worth c.£130,000 were to be included within the sale.
Financials – the practice benefits from a strong capitation scheme generating £445,000 per annum. The NHS contract of £195,000 for 7,000 UDAs delivers a healthy UDA rate of £27.85. The remaining private income of £140,000 makes up the total annual turnover of £780,000. Staff costs at the practice were higher than expected based on comparable businesses, however laboratory and material costs were carefully controlled at 6.8%, ensuring that profitability remained strong.
Buyer appetite – the practice was sold on our general market tier, with 462 buyers receiving the initial disclosure document and 96 buyers requesting full sales particulars.
Reason for sale/incoming purchaser – the outgoing principal was happy to stay on at the practice post sale, which suited the incoming purchaser who was an investment buyer with a small group of dental practices.
Price achieved – £905,000 inclusive of goodwill, equipment, fixtures/fittings and freehold.
Practice location – located within a coastal town in east England, this long-established practice was acquired by the current vendor in 1986. The practice occupies a converted end-terraced property within a residential area, on a busy main road. There is free on-site parking available and excellent transport links.
Type of practice – this is a four-surgery, mixed practice with two associates and two hygienists delivering income alongside the principal. The freehold premises worth c.£130,000 were to be included within the sale.
Financials – the practice benefits from a strong capitation scheme generating £445,000 per annum. The NHS contract of £195,000 for 7,000 UDAs delivers a healthy UDA rate of £27.85. The remaining private income of £140,000 makes up the total annual turnover of £780,000. Staff costs at the practice were higher than expected based on comparable businesses, however laboratory and material costs were carefully controlled at 6.8%, ensuring that profitability remained strong.
Buyer appetite – the practice was sold on our general market tier, with 462 buyers receiving the initial disclosure document and 96 buyers requesting full sales particulars.
Reason for sale/incoming purchaser – the outgoing principal was happy to stay on at the practice post sale, which suited the incoming purchaser who was an investment buyer with a small group of dental practices.
Price achieved – £905,000 inclusive of goodwill, equipment, fixtures/fittings and freehold.
