GUEST COMMENT: A need for greater care

Written by David Fairs

“There needs to be a great deal of care taken before further pension tax changes are made,” says ACA chairman David Fairs

In our annual report of our 2015/16 ACA pension trends survey, Time to pull together, we focus on employers’ views on the further reform of pension taxation and how this might impact on pension coverage.

We also explore how employers appear to be reacting to the end of defined benefit contracting out from April of this year.

Our findings suggest that this will trigger a further wave of defined benefit closures to future accrual, exacerbating the worrying drift downwards in median pension contributions reported in our initial ACA survey report, Time to get real, published in October 2015.

We have been very supportive of the government’s ‘freedom and choice’ reforms, but we do feel that the government should ensure that any further reforms to pension taxation are workable and that they work supportively alongside the auto-enrolment policy, which itself needs to be carefully monitored as it impacts on small firms.

In that regard, employee opt-out rates have been lower than many expected and as a result the number of UK employees in workplace pensions – so long in reverse – has recovered to the levels of coverage we had in the 1960s, but generally at very low levels of contributions.

There needs to be a great deal of care taken before further pension tax changes are made – any reform must genuinely simplify the regime for both employers and employees and, above all, must genuinely incentivise pension saving as opposed to simply raising tax revenues.

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