Changes to pension tax relief in recent years have already caused schemes to lose members on higher incomes, according to research from the Association of Consulting Actuaries (ACA).
Its Time to pull together survey which sought views on potential further reform, found that 31% of the 477 employers polled said reductions to tax relief and complexities of the regime had led to higher earners leaving their schemes.
The situation was even worse for large employers with more than 5000 employees, with 78% saying members on higher earners had left because of the changes.
The trade body's report comes as the chancellor is expected to announce a flat rate of tax relief in his 16 March Budget in order to reform the system, although he is not expected to announce the more radical option of an ISA-like approach to tax.
In the ACA's survey, 58% of employers said the latter would not boost pension saving.
The survey also revealed that 81% of employers were concerned about the level of pension spending they were incurring, with 37% saying they are very concerned. This was particularly true of smaller employers, many of which had yet to implement auto-enrolment (AE).
It found that one in five employers with defined benefit (DB) schemes still open to future accrual said they would close them following the end of contracting-out this April. The ACA said this that tax relief reform in the spring Budget could raise this figure above 20%.
Of the employers surveyed, more than 25% still had existing DB schemes, however, only 7% were open to new and existing members, with the balance either closed to new members or closed to future accrual.
ACA chairman David Fairs (pictured above) said while the association had been supportive of the government's freedom and choice reforms that came into force last April, further reforms to tax relief should be workable and support the AE policy.
He said: "We must have the ambition to ‘pull together' to convince employers and employees alike to save more to improve retirement incomes, particularly for those in receipt of lower workplace incomes, with the government reviewing in a joined-up way its pension strategy, spending plans, tax policies and incentives to help make this happen."
It is the ACA's second and final report on pension trends following a survey on AE published in October 2015.
PP has investigated how further tax relief reform will likely affect pension schemes.
• Surveyed 477 employers sponsoring over 620 schemes.
• 81% of employers were concerned about their spending on pension costs, with 43% looking to target 6% or less of payroll on pensions.
• 31% said reduction in tax relief and the complexities of the regime had caused employers on higher incomes to leave their scheme(s).
• 13% said an ISA-style pension with a government top-up during accumulation would boost pension saving.
• 20% of employers running DB schemes would now close them following the end of contracting-out in April 2016.
• 82% expected that by 2020, the typical retirement age would be 66-67.
• 85% say the government should set up an Independent Pension Commission to make periodic recommendations on pension policies to ensure these are cost-effective and sustainable for all.
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