UK - Consultant Watson Wyatt has bucked the general industry view with claims that the National Audit Office forecast on the £1.4m cap could be over-estimated.
Watson – in stark contrast to most its peers – says the figures were “very sensitive to assumptions” and could actually be halved to within the government’s original estimate of 5000.
Partner John Bull said the NAO figures failed to take into account the part of pension benefits to be commuted for a tax-free lump sum.
He said: “If you allow for the effect of commutation – and most people take the maximum tax-free lump sum – the numbers affected could actually fall by as much as half, back to within the government’s original estimate of 5000 people.
“In effect, the overall limit is not £1.4m, but around £1.7m.”Watson Wyatt – which has half of the UK’s 100 UK largest pension schemes as clients – said the sensitivity of the assumptions meant the estimate could also significantly increase.
Research by the consultant found that a 1% rise in annual real salary increases could double the number of people affected.
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