There is strong employer support for a simplified pension tax regime, according to a new report.
Ahead of the Autumn Budget, a report by the Association of Consulting Actuaries found that almost six in 10 (59 per cent) employers say the current pension tax structure is too complicated.
Three quarters of those surveyed support Government changes that would target help on lower income earners.
This year there have, again, been budget ‘rumours’ that the chancellor, Philip Hammond, may abolish higher rate pension tax relief, and introduce a flat rate system. This could benefit those on lower incomes, while saving money for the Treasury.
The report – which surveyed 349 employers of various sizes – asked for more details on how employers would like to see the pension system simplified.
Almost eight out of 10 (78 per cent) said the tapered annual allowance should be re-thought, while 53 per cent called for the lifetime allowance to be abolished.
However the report also found that around a third of employers said changes and increases in pensions taxation over recent years had caused senior staff to leave their firms’ pension scheme.
A similar proportion says these changes had also created pressures to revise pay and benefits packages and caused those businesses to reconsider their pension arrangements.
ACA chair, Jenny Condron, says: “Any further reduction in the overall tax relief given to encourage pension saving in this year’s Budget would, in our view, undermine the prime minister’s pledge that austerity was coming to an end.
“Moreover, general levels of pension saving remain far too low to deliver comfortable levels of income in later life – people need to save more.
“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.
“Issues like the gap between DB and DC pension taxation also need to be addressed.”
She adds: “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.”
She says it would be helpful if there was some cross-party support for such an initiative, to restore a long-term confidence that the goal-posts won’t move year in, year out.
