11 May 2017
In April 2016, significant changes to the UK pensions tax regime took effect, with the introduction of the tapered annual allowance and further reduction to the lifetime allowance.
Now, more than one year on, the changes driven by this have been revealed in our survey of FTSE 100 companies.
Those who didn’t change their pension options were few and far between. The majority (90%) had made changes as they tried to mitigate the effects of the new rules and avoid their employees paying unnecessary tax. Member communication is also key, with an increasing focus on reinforcing the message that tax is a personal issue.
My experience over the last year has been that a few simple steps can help make sure members see the benefits of their pension package, rather than getting caught in a tax trap.
Step 1: Review and benchmark the package you provide
While there are different approaches you could take, our survey found that most companies choose to keep things simple.
Step 2: Improve benefit statements
A minimum compliance approach is likely to store up trouble for the future. Some simple improvements could reap rewards.
Step 3: Move to a self-service approach
Only the member can assess how they are impacted by the tapered annual allowance. Bite-sized videos and simple modellers can be effective, giving members the option to access information when they need it, in a user friendly format.
Step 4: Make best use of “Scheme Pays”
Where tax is due, it being paid by the scheme can be a great help. Policies and processes may need updating to avoid restrictions in the statutory framework.
Finally, my advice is to keep an eye out for more change as the snap election date looms, there may be more tinkering to come.
If you’d like to understand where you fit when it comes to your executive pensions policy, we would be happy to help you benchmark your scheme - please get in touch.
Download our FTSE 100 pensions tax survey here