Middle-class parents are to be forced to pay hundreds of pounds a year into pensions for their nannies.
Tens of thousands of families will see the cost of their childcare rise by as much as £600 a year from 2015, it has emerged.
Under the Government scheme, they will also have to fund pension contributions for cleaners, gardeners and home helps whose pay exceeds £9,440 a year.
Squeezed middle: The cost of childcare could
rise by as much as £600 a year for a family paying for a nanny as they
are auto-enrolled in the new scheme
Parent groups say this will add to the burden on the already-squeezed middle, with mothers accusing the Government of treating parents ‘like a profitable business’.
There are an estimated 111,484 nannies working in the UK, according to the National Careers Service. And soaring numbers of families employ domestic help, including cleaners and gardeners.
More than six million people were employing domestic help in 2011, a rise of a million compared with a decade earlier.
Now, under the Government’s auto-enrolment scheme – the biggest shake-up to pensions for a century – every employer will have the responsibility of enrolling their staff into a pension scheme.
The rules, which came into force for big businesses last October and are gradually being extended to smaller firms, will see more than 11million workers enrolled into a company pension for the first time, with both employee and employer paying contributions, initially at 1 per cent.
Empty pram: Parent groups such as Mumsnet say
the enforced pension-enrollment will mean families will not be able to
afford childcare
From as early as June 2015 it will be rolled out to those who might not consider themselves employers, such as families who take on help with cleaning, childcare or gardening.
They will be legally bound to offer a pension to anyone aged over 22 but below the state pension age who they pay above the tax threshold – currently £9,440 a year.
By the time the rules are fully implemented by 2018, contributions will rise to 3 per cent.
For someone who employs a full-time nanny earning £25,000 a year, this would push up their childcare bill by £48 a month.
Mumsnet website founder Justine Roberts said childcare issues were an ‘enormous problem’ and a rise in costs could prevent parents going back to work.
‘The high cost of childcare is one of the most frequent concerns of Mumsnet users,’ she said.
CHILD BENEFIT DEADLINE LOOMS
Parents have been told by the head of Revenue and Customs to ‘get off their backsides’ and register for tax self-assessment.
Lin Homer said hundreds of thousands of people could be caught out by the changes to child benefit. Families receiving the benefit where one person earns £50,000 or more are meant to register by today.
Households where one person earns more than £60,000 will have to pay back all their child benefit in income tax if they have not already opted out of receiving it.
Mrs Homer told Radio 5 Live: ‘We think there’s about 200,000 people who need to get off their backsides and do something.’
People who do not register could face fines of between 10 per cent and 100 per cent of the child benefit paid. However, it is unlikely that anyone who registers and pays the tax by January 31 will be penalised.
‘HMRC is committed to helping people pay the right amount of tax and urges parents who have been affected by the changes to child benefit to register for self-assessment,’ said Mrs Homer.
She advised anyone unsure whether they are affected by the change to go to the HMRC website, adding: ‘We know that lots of people leave it until the last minute.’
Many of those affected had already opted out, she said.
Anita Monteith, of the Institute of Chartered Accountants, said: ‘This adds considerable complication to the tax system for ordinary people, particularly for those brought into the self-assessment system for the first time.’
TUC General Secretary Frances O’Grady said some parents who are not affected had still received letters from HMRC telling them to register. ‘The changes to child benefit are a mess,’ she said.
Lin Homer said hundreds of thousands of people could be caught out by the changes to child benefit. Families receiving the benefit where one person earns £50,000 or more are meant to register by today.
Households where one person earns more than £60,000 will have to pay back all their child benefit in income tax if they have not already opted out of receiving it.
Mrs Homer told Radio 5 Live: ‘We think there’s about 200,000 people who need to get off their backsides and do something.’
People who do not register could face fines of between 10 per cent and 100 per cent of the child benefit paid. However, it is unlikely that anyone who registers and pays the tax by January 31 will be penalised.
‘HMRC is committed to helping people pay the right amount of tax and urges parents who have been affected by the changes to child benefit to register for self-assessment,’ said Mrs Homer.
She advised anyone unsure whether they are affected by the change to go to the HMRC website, adding: ‘We know that lots of people leave it until the last minute.’
Many of those affected had already opted out, she said.
Anita Monteith, of the Institute of Chartered Accountants, said: ‘This adds considerable complication to the tax system for ordinary people, particularly for those brought into the self-assessment system for the first time.’
TUC General Secretary Frances O’Grady said some parents who are not affected had still received letters from HMRC telling them to register. ‘The changes to child benefit are a mess,’ she said.
‘On Mumsnet people often cite the cost as a barrier to returning to work – for many once you’ve paid tax and contributed to a pension it will simply not be worth it.’
There are also fears that many families will try to duck the extra payments by paying their nannies ‘under the table’ or making them self-employed.
Dawn Kirenli, director of the Association of Professional Nannies, said: ‘We are already seeing a growing problem of parents trying to cut costs by paying nannies cash in hand or illegally forcing them to become self-employed.
'It is highly likely we will see those same people trying to get round the pensions changes as well.’
On Mumsnet, mothers attacked the new pension scheme. One wrote: ‘It will tip me over the edge and put one nanny out of work.
‘People will put their nanny on the books for some £500 per month, call her an au pair and then pay the rest in cash. Proper on-the-books nannies will become a privilege of the rich. Treating parents like a profitable business is outrageous.’
Tory MP Mark Field said: ‘£600 may not seem like a lot of money to some people but in hard-pressed families it could well be the straw that breaks the camel’s back. They may be forced to take on full-time childcare themselves.’
Colleague Jacob Rees-Mogg, who has paid into a pension for his family’s nanny for years, said: ‘I imagine very few people are aware of the scheme.’
Some families could be forced to sack their nannies, he said. ‘It is a question of balancing between the need to provide for people in retirement and the need to provide now.’
As well as a financial strain, setting up a pension is likely to prove a time-consuming and laborious process for families with domestic help.
First they must register with the Pensions Regulator and find out what date they need to comply with the rules by. Then they must find a scheme, open an account and write to their employee telling them they are going to be signed up.
Failure to stick to the rules can result in penalties of up to £50 a day or even prosecution.
Families who have employed their nanny prior to April 2012 will have to pay into the pension scheme from as early as June 2015. Those who have enlisted a nanny since then will not have to pay until 2017.
Elaine Clarke, of tax consultancy Cheapaccounting, said: ‘I know it really sticks in people’s throats. We’ve got a pensions time-bomb ticking away and somebody has to pay for it.’
'Automatic enrolment is the biggest change to the pensions system in a century - aimed at addressing a culture of serious under-saving for later life,' Department for Work and Pensions spokesperson said.
'Over the next five years more than 1 million employers will provide their staff with the chance to save for their retirement, many for the first time.
'Nannies, as employees, will also be able to benefit from the reforms, and we would encourage families hiring them to look into how to prepare.
'Reliable and affordable childcare is vital for parents who want to stay in or return to work, which is why from 2015 the Government will introduce new tax free childcare which will be worth up to £1,200 per child annually.'
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