The findings also reiterated that there was still no appetite amongst employers for a radical restructuring of the pension tax regime, if this was being considered separately by the Chancellor in his autumn Budget statement, but there was support for spreading more of the total relief available to those on lower incomes.
Key findings in interim report
The ACA survey, which was conducted over the summer and received responses from 466 employers, found:
Amongst those with defined benefit schemes (39% of sample)
53% say the costs associated with their defined benefit schemes are having a negative impact on pay increases, with 80% saying their cost was also having a negative impact on inter-generational equity.
42% say DB costs are also having a negative impact on contributions into newer schemes.
32% of employers feel consolidation of DB schemes is ‘generally a good thing’ and that cost savings would be real. However, many respondents remain uncertain on the pros and cons of consolidation.
84% of employers say the law should be changed so that defined benefit schemes can reduce pension increases if continuing to provide increases at the level of scheme rules will severely and adversely affect the employer, with the largest number favouring this being subject to an agreement with trustees.
Whilst 55% of employers say further legal restrictions will hasten the closure of more schemes to future accrual, 79% support increased punishments for those caught mismanaging schemes and 68% support new criminal offences for directors who ‘deliberately and recklessly’ put at risk the ability of a scheme to meet its obligations.
Pension taxation
77% of employers favour retaining the current pension tax relief structure, but with more help targeted on lower incomes.
Just 13% support moving to pensions being paid tax-free, with pension tax relief abolished.
52% of employers say restrictions on pension tax relief have caused those on higher incomes to leave their firm’s scheme.
36% of employers say the restrictions in tax relief have led to pressures to revise pay and benefits packages and 22% to reconsider their pension arrangements.
ACA Chairman, Bob Scott, noted: Our survey findings this year paint a picture of defined benefit schemes where complexities introduced over the years – largely by dint of public policy – have taken their toll. Legislative and regulatory changes seem unremitting and are continuing to present challenges to sponsors and trustees. Whilst a majority of employers fear more legal restrictions will accelerate scheme closures still further, they seem sanguine about further legal restrictions being placed on sponsors and trustees in the upcoming Government White Paper. That said, the vast majority also expect support in the White Paper for some greater flexibility in law to adjust future pension increases if they are in financial difficulty.
“On pension taxation, it is clear the restrictions in reliefs in recent years have had a major impact on pay and benefits strategies at firms, with many senior staff ‘opting out’ of pension arrangements as a result. Beyond doubt this has had an adverse impact on support for schemes within firms, often with those on lower incomes losing out as a result. As the last Chancellor found, there seems to be little support for radical tax reform, although employers seem accepting of those on lower incomes getting a larger share of the relief available.”
Further Interim Reports on the survey’s findings are due to be published next month and a final report in November.
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