According to Hewitt Associates, the new regime will bring a personal annual pension saving allowance of between £30,000 and £45,000, with at least a 40% rate of tax on pension contributions over the threshold. It will raise £3.5 billion for the Government and will potentially affect many final-salary scheme members and high earners.
Hewitt’s call to action to employers was issued despite the fact that full legislation is still subject to consultation and will not be published until autumn 2010. But with only nine months left until implementation, organisations have little time to assess the full range of options and identify the most appropriate, tax-efficient means of retirement saving for their employees.
As a consequence, some of the UK’s largest employers would like the UK Government to delay the implementation of its proposed changes to pension tax relief. The news comes as 85% of respondents voted in favour of a delay, in a recent Hewitt poll.
Tony Baily, principal consultant at Hewitt Associates, said: "While we welcome the Government’s aim to put in place a more simple tax regime for pensions, there is still significant uncertainty just nine months away from the implementation deadline.
"However, in this case employers cannot afford to wait for the full details. We don’t expect the Government to delay implementation as it still needs to raise £3.5 billion each year from pension tax changes. Next April will come around very quickly, so companies must take steps now to understand the potential outcomes and how they will need to restructure their benefits to offer best value for their employees."
The new regime is due to be implemented in April 2011, but is subject to informal consultation over the coming months, with draft legislation due out in the autumn. In the interim, high earners are subject to anti-forestalling measures designed to prevent companies from exploiting loopholes as the finer details of the tax measures are finalised.
Employers should be getting ready now for the changes to the pension tax regime in April 2011
One of the UK's biggest HR consultancies has urged employers to start planning for the major changes to the pension tax regime, due to be implemented in April 2011.
