If not changes to tax relief – then what?
Last week saw a U-turn in Budget predictions, with widespread reports that the Chancellor will not in fact make changes to pensions tax relief on Wednesday.
While stranger things have been known than a U-turn on a U-turn, the industry has now turned to speculation about what changes may be implemented.
Phil Wadsworth, director, JLT Employee Benefits, comments on the news: “It is with relief that we welcome the Chancellor’s turnaround, in choosing not to introduce Pensions ISAs. However, we feel he would miss a huge opportunity to incentivise workers, particularly those lower paid to save for retirement. Constant tinkering of pension legislation is denting the confidence of members and sponsors, and uncertainty over future changes risks drawing employers towards just meeting their automatic enrolment obligations.”
So what questions do employers have? The changes coming on April 6 to pensions tax rules for the Annual Allowance and the Lifetime Allowance, employees are seeking advice from their companies on the impact this will have.
Jelf Employee Benefits has seen a “significant increase” in enquiries from employers around the changes, and how best they should communicate with their staff about them, suggesting they identify now which staff members will be affected.
“The tax implications are far reaching and complicated. If ever there was a time to seek expert advice it is now. Employers need help in addressing the salient issues to find the solution that works for their business and their people,” says Alan Millward, managing director – financial services for Jelf Employee Benefits. “What we know for sure is that the Annual Allowance and Lifetime Allowance are issues that need to be addressed now.”
Claire Carey, partner at Sackers, agrees. “Higher earners have not escaped from plans to restrict pension benefits. They will now be focused on significant reductions in the lifetime and annual pension savings allowances.”
And could there be more change beyond the LTA and AA?
“A promise not to change the current system of tax relief, at least for now, leaves the Government with plenty of options to modify the current regime,” says Carey. “A week after a Government review of the state pension age suggested employees may be working into their 80s, could an accelerated rise of the retirement age now be on the cards?”
Whatever occurs on Wednesday, it is certain that employers will still need to look at the ongoing industry changes – and make sure they are prepared to help their staff and answer the inevitable questions.
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