Aon Hewitt, the global talent, retirement and health solutions business of Aon plc (NYSE:AON), has said that yesterday’s Budget has produced potential inconsistencies in pension outcomes. |
Removal of National Insurance for under-21s has perverse outcome for pensions
Lynda Whitney, partner at Aon Hewitt, said:
“The removal of National Insurance (NI) for those under the age of 21 will have a perverse outcome for pension savings. Most pension schemes now use salary sacrifice so that pension contributions are NI free as well as tax-free, cutting the cost to the member of pensions saving.
“Unfortunately, this NI benefit will no longer be available to those under 21. This will increase the cost of pensions savings by 12% for a typical person under the age of 21.
Inconsistency between DB and DC Lifetime Allowance
Lynda Whitney said: “There is a stark inconsistency between the effects of the new Lifetime Allowance (LTA) of £1 million on defined benefit (DB) and defined contribution (DC) pensions.
“In the DC world, £1 million may buy an increasing pension of only around £25,000pa, while in the DB world you are allowed a pension of £50,000pa without breaching the Lifetime Allowance (LTA). This is because HMRC uses a fixed factor of 20 to calculate the LTA for a DB member and you cannot currently buy £1pa of increasing pension for anything like as low as a £20 premium.
Lynda Whitney continued:
“If this inconsistency is not resolved we could see the development of middle and senior managers wanting to join a DB scheme just to ‘bed & breakfast’ their pensions in order to get the higher tax allowance.
“It’s also worth bearing in mind that the LTA now limits DC pensioners to an income which is probably below the national average earnings for full-time employees (£29,536pa).”
|
|
|
|
Pensions Data Science Actuary | ||
Offices UK wide, hybrid working - Negotiable |
Head of Pricing | ||
London - Negotiable |
Global Specialty Pricing Actuary | ||
London - £95,000 Per Annum |
Client-facing DC investment manager | ||
London / hybrid 3 dpw office-based - Negotiable |
Financial Risk Leader - Bermuda | ||
Bermuda - Negotiable |
Aylesbury Actuaries | ||
Aylesbury / hybrid 3dpw office-based - Negotiable |
Make an impact in protection pricing ... | ||
London / hybrid 2 days p/w office-based - Negotiable |
BPA Implementation Manager | ||
North / hybrid 50/50 - Negotiable |
Head of Reserving | ||
London - £160,000 Per Annum |
In-force Longevity Actuarial Analyst | ||
London / hybrid 2 dpw office-based - Negotiable |
Make a difference within reinsurance ... | ||
London / hybrid 2 dpw office-based - Negotiable |
Be at the cutting-edge of life & heal... | ||
London / hybrid 2 dpw office-based - Negotiable |
Longevity Pricing Analyst | ||
London / hybrid 2 dpw office-based - Negotiable |
Develop your career in life reinsuran... | ||
London / hybrid 2 dpw office-based - Negotiable |
Protection Pricing Actuary - Life Rei... | ||
London / hybrid 2 dpw office-based - Negotiable |
Life (Re)insurance Pricing Manager (P... | ||
London / hybrid 2 dpw office-based - Negotiable |
Take the lead: life & health reinsura... | ||
London / hybrid 2 dpw office-based - Negotiable |
Pricing Tools and Systems Developer | ||
London / hybrid 2 dpw office-based - Negotiable |
Longevity Pricing Actuary | ||
London / hybrid 2 dpw office-based - Negotiable |
Shape the future of longevity | ||
London / hybrid 2 dpw office-based - Negotiable |
Be the first to contribute to our definitive actuarial reference forum. Built by actuaries for actuaries.