UK - Aon Consulting is launching an unfunded benefits package to help executives avoid the Inland Revenue's £1.4m savings limit.
Aon believes the limit will affect up to 200,000 people 40 times more than the government estimates. If people go over the limit they will be hit by a “recovery charge” equal to a third of their pension pot.
The government will reveal full details of the tax changes next month.
But consultants fear the current set of schemes aimed at higher earners – such as unfunded unapproved retirement benefit schemes, funded unapproved retirement benefit schemes and secure unfunded unapproved retirement benefit schemes – will be hit by the tax changes.
Head of research Simon Martin said: “If Furbs are caught by the tax changes they will be uneconomic for companies to run.
“That’s quite vital, because people already pay tax going in and if it comes into the new tax regime and they have to pay tax on the way out, that’s really quite offensive.”
Aon said E-Trust was similar to Furbs in that companies would gain corporate tax relief from paying contributions, which would then be invested in various asset classes.
Unlike Furbs, E-Trust is not technically classified as a pension benefit, so members will receive their part of the trust on leaving service, not on retirement.
Watson Wyatt partner Sue Bartlett said: “Executives will be in the same situation as if they were members of an approved scheme.
“If they are going to be faced with a tax of 60% for being in a scheme, the obvious question is: ‘Why would I want to be a member? Give me some other form of benefits instead’.”
Aon said E–Trust would be ready for launch once the full details of the tax changes were available.
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