In July 2015 George Osborne announced a major review of pensions tax reliefs – and the results of this consultation are expected to be included in the Chancellor’s March Budget speech. Options on the table include introducing a flat rate of tax relief for all savers, or even a possible removal of initial incentives altogether.
Steve Herbert, head of benefits strategy at Jelf Employee Benefits commented: “Although it is as yet unclear as to the final shape of pensions tax reliefs post-Budget, most experts are agreed that higher rate tax relief will probably be removed. Those savers impacted by this change need to be made aware of the issues so that they can make an informed decision and plan effectively, and perhaps bring forward any pension contributions to be invested before any restrictions of tax relief are applied.”
Only 20% of the employers surveyed had taken any action to alert their employees to these changes, despite more than 6 in 10 (63%) admitting to their awareness of the issue.
Herbert continued: “It is a little disappointing that employers have not been more proactive in this respect, and we would encourage more to now alert their employees to this potential change as a matter of real urgency.”
The survey also asked employers how long they would need to adapt to any announced change. Almost 7 in 10 employers (69%) indicated that they required at least a period of 12 months – including 14% who expect a 24 month window, and 10% hoping for three years’ notice to plan for any changes.
Herbert concluded: “These findings are crucial. The proposed changes create potential issues for employers as well as savers. Employers potentially have a lot of work in store as they will need to issue and update pension communications, provide guidance to impacted employees, and possibly adapt administration and payroll procedures too. These things can’t be done overnight. The Chancellor needs to recognise that pensions are not a core part of every employer’s day-to-day business activities and they will need time to plan and implement any proposed changes.
“We would hope that this is recognised in any final proposals come the Budget announcements.”
|
