Guest comment: Addressing the pension tax regime's complexity

In the first of a series of reports about the ACA’s 2020 Pension Trends survey, we have found mounting evidence of the adverse impact of the current complexity in the pension tax regime on UK employers, with many employers supportive of reforms targeting those on lower incomes.

Seventy-nine per cent of employers say the complex pensions tax regime is negatively impacting their business; and 89 per cent say it needs simplifying even if that means some people are worse off.

A majority of employers are for maintaining spending on pensions tax relief – although some four out of 10 employers also seem prepared for reduced reliefs on future pension savings to help government reduce spending post Covid-19.

On GMPs, our survey found over nine out of 10 expected to fully equalise within three years, but just a quarter had completed a material part of the project.

The D2 (conversion) method is the most popular method employers expect to use and would be more popular still if HMT/HMRC/DWP were to address tax and legislative challenges.

The survey findings underscore the degree to which the present pension tax regime has been distorted by short-term tinkering over the years. It is having an impact on the economy by reducing productivity and workplace cohesion.

The message is that there is a now urgent need for HMT and industry practitioners to find a consensus around the best way forward. The mounting dislike of the current complexity and adverse impact on business means that this task cannot be put off.

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