UK - Inland Revenue restrictions on employer contributions to plug fund deficits could push more companies to abandon their final salary schemes, Horwarth Clark Whitehill warns.
The accountancy firm said the Revenue rigidly spreads the tax relief for “special contributions” over four years, leaving sponsoring employers waiting on backdated tax relief claims.
Horwarth Clark Whitehill pensions group head Zahir Fazal said this is a further addition to the raft of anti-DB measures still in place.
He said: “This creates a substantial mismatch between the cash outlay and the timing of the tax relief, which is disadvantageous for the payer.”
For example, he said, a company making a special contribution of £10m would only get a tax benefit of £750,000 in the year in which the contribution is paid, with the remaining £2.25m of tax benefit spread over a further three years.
Fazal added: “In these difficult times, one would expect the Inland Revenue to exercise its powers more pragmatically and for policy-makers to be seeking to encourage, rather than discourage, the elimination of these massive and worrying deficits.”
Mercer Human Resource Consulting senior consultant Deborah Cooper agreed and urged the Revenue to use its discretion to reduce such tax obligations.
“It is in the Inland Revenue’s interest for people to put money into pension schemes at the moment so this would be rather like shooting yourself in the foot.”
Potential changes to accounting standards and increased pressure on companies to accelerate contributions could worsen FTSE 100 scheme funding by up to £100bn, according to Lane Clark and Peacock (LCP).
Smart Pension has taken on over 20,000 active members from the £20m Corpad Master Trust, following a strategic review by the ceding firm's trustees.
The Universities Superannuation Scheme (USS) allegedly obstructed a whistleblower as she tried to discover the true value of the deficit in its defined benefit (DB) section, according to reports.
The Cost Transparency Initiative (CTI) has launched a number of templates and guidance to help pension schemes deliver greater value for savers with enhanced disclosure of transaction cost information.