Seventy-seven per cent of employers do not want to see any radical reform of the current pensions tax relief system, according to research by the Association of Consulting Actuaries.

They survey’s results were presented at the first meeting of the All-Party Parliamentary Group on Pensions, where ACA chairman Bob Scott noted that the findings reiterated that there is still no appetite amongst employers for a radical restructuring of the pension tax regime, however they do support more help targeted to those on lower incomes.

Just 13 per cent support moving to pensions being paid tax-free, with pension tax relief abolished. Over half (52 per cent) of employers say restrictions on pension tax relief have caused those on higher incomes to leave their firm’s scheme. A further 36 per cent said the restrictions in tax relief have led to pressures to revise pay and benefits packages and 22% to reconsider their pension arrangements.

Scott added 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.”

The survey also looked at the impact of defined benefit schemes on employers, and found that 53 per cent said the costs associated with their DB schemes are having a negative impact on pay increases, with 80 per cent saying their cost was also having a negative impact on inter-generational equity.

In addition, employers also believe (42 per cent) DB costs are also having a negative impact on contributions into newer schemes. Thirty-two per cent 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.

The research found that 84 per cent of employers think the law should be changed so that DB 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 per cent of employers said further legal restrictions will hasten the closure of more schemes to future accrual, 79 per cent support increased punishments for those caught mismanaging schemes and 68 per cent support new criminal offences for directors who ‘deliberately and recklessly’ put at risk the ability of a scheme to meet its obligations.

“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,” Scott said.

“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.”

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