Three-quarters of employers want the pension tax regime simplified, with 67% saying more help should be targeted on lower earners even if this would mean reducing relief for higher income groups, results published in the ACA 2019 Pension trends survey have revealed.
The survey also found that 69% of responding employers wanted the Tapered Annual Allowance to be abolished – even if this would mean a reduction in the general annual allowance.
The association warned that whilst the findings had shown unease about the impact of the regime, as well as creating widespread calls for reform, the ACA suggested it would be vital that any change should be considered after the General Election – with cross-party deliberations and openness on the political aims, and with input from experienced practitioners on its structure.
ACA chair, Jenny Condron, commented: “The findings in our third report on our 2019 Pension trends survey have underscored employers’ frustration with the damaging impact of the ‘tightening’ of pension tax reliefs in recent years through lower Annual and Lifetime Allowances, and the complexity that this has introduced.
“There is widespread demand for reforms to simplify a tax regime that is now well past its sell-by date. It is clear that any reforms being considered by the Treasury must not be short-term tweaks for public sector employees only – reforms must be even handed and extend to resolving problems that impact on all wealth-generating sectors of our economy.
“Any major revisions to the regime must be robust and enduring, enabling employees to plan for long term pension saving.
“The present complexity results in some individuals being put off saving for retirement. Further, many key decision makers within businesses have opted out of involvement in their company pensions due to their individual pension tax positions.
“We see many employers deterred from establishing and maintaining pension schemes for their staff beyond the minimum required by auto-enrolment.”
The survey, which was conducted over the summer and received responses from 308 employers of varying sizes, also revealed that 44% of responding employers – up from 30% last year – said the impact of current restrictions in relief had caused higher income employees to leave their firms’ pension schemes.
The ACA suggested this had caused an increasing number of senior decision-makers to disconnect from personal interest in this key element of the employee package.
Condron continued: “We have elsewhere noted how important it is in the DB world to enable simplification of benefits. We are sure that some of the comments about complexity from our surveyed schemes arise from their experience that the pension tax rules create uncertainties that hold up sensible projects such as GMP equalisation and conversion.
“The public, working in both the private and public sectors, across all income groups deserve a regime that is simple to understand, that encourages savings, does not disenfranchise decision makers, (and) one that does not bring unwelcome tax surprises ‘out of the blue,’ as at present.”
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