UK - Mercer Human Resource Consulting is concerned that the government's new tax exemption on pension advice and information masks a wider push to require all employers to contribute to pensions via the back door.
Citing an “increasing determination” by government to nudge employers down this route, Matthew Demwell, European partner at Mercer said: “It has become obvious that employers who do not contribute 3% of pay to their employees pensions are likely to be expected to spend a chunk of the money saved on advice.
“Many employers will take the hint and start offering contributions, but as a result people will have cash tied up in pension plans which might have been better used elsewhere.”
The exemption, which hopes to encourage companies to boost pensions awareness and take up, applies to fees for one-to-one sessions on financial advice to employees or external seminars. However, if the cost to the employer is over £150, the whole amount will be subject to tax.
Commenting on the regulations, Pensions Minister Malcolm Wicks said: “These regulations reinforce our position that employers should provide employees with access to a decent standard of pension information and advice in the workplace.”
Demwell said the move was encouraging but the £150 limit imposed by the government was “insufficient” to pay for any “meaningful” personal advice.
“There is no incentive for employers to provide more than the minimum as their employees will be taxed on the entire amount if the advice fees exceed £150,” he said.
“The first £150 of advice should be tax-free, even if the total cost exceeds that amount. The advice needs to cover all the financial options open to employees so they have the full picture.”
This week's edition of Professional Pensions is out now.
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