Seventy-eight per cent of employers think that the pensions tapered annual allowance should be re-thought, according to the Association of Consulting Actuaries.
ACA chair Jenny Condron has said that any further reduction in the overall tax relief given to encourage pension saving in this year’s Budget would undermine the Prime Minister’s pledge that austerity was coming to an end.
In a survey of 349 employers, the ACA also found that 59 per cent of employers believe the current pension tax structure is too complicated and needs simplification. Over half (53 per cent) want to the lifetime allowance to be abolished, and 75 per cent of employers support changes to pension tax relief that would target more help on lower income earners.
The survey also found that around a third of all the responding employers had found the changes and increases in pensions taxation over recent years had caused senior staff to leave their firms’ pension scheme; had led to pressures to revise pay and benefits packages and caused those businesses to reconsider their pension arrangements.
Condron said that general levels of pension saving remain “far too low” to deliver comfortable levels of income in later life and people need to save more.
“Pension tax relief remains an important part of social policy and should reward and encourage employers, employees and the self-employed to lock money away. What our survey found is that very few are happy with the way the current pension tax regime is working. In short, it has been corrupted by numerous tweaks so it is no longer fit for purpose.
“We struggle across the professions to find anyone who fully understands and says they can reliably administer the rules now in place. That is frankly a ridiculous situation,” she added.
In addition, she said issues such as the gap between defined benefit and defined contribution pension taxation also needs to be addressed.
“It cannot be fair that the outcomes for DB and DC members can be so different under the lifetime allowance in place or that DC members can suffer penalties for investment out-performance. Employers want the government to simplify the regime, not in a rushed and rather disorganised way as was the case in 2015, but carefully by way of a cool and calm ‘open’ consultation and review post-Brexit.
“The aim should be to re-establish a stable, transparent tax regime that rewards and encourages employees on all incomes to save for later life, whilst also encouraging employers to play their very important part. Rightly, the government should be able to cap the amount of tax relief pensions enjoy, but importantly it must restore a long-term confidence that the goal-posts won’t move year in, year out. Ideally and optimistically, it would helpful if there was some cross-party support for such an initiative.
“The Chancellor could ‘steady the ship’ and make a commitment to such a review in this year’s Budget as a follow up to the recent government response to a Treasury Select Committee report. In recent years, complex tax changes have been rushed through without the opportunity for anybody to think through the implications. The present Chancellor has a reputation of examining issues thoughtfully - a change towards this approach in respect of pension taxation would be particularly welcome.”