Pension tax concerns 'distracting' from crucial industry issues
Major industry concerns such as GMP equalisation are being left on the back burner as employers continue to grapple with the complexities of pensions tax, the Association of Consulting Actuaries says.
Data collated over the summer to form the body's 2019 Pension Trends Survey was released today (4 November) showing 75% of employers want the pension tax regime simplified.
Most remain unhappy about a host of industry issues including tax relief restrictions, the structure of potential reforms, and the current state of the tapered annual allowance.
The ACA said responses show "grave unease" and are supportive of consistent industry-wide calls for reform.
However, a pension tax overhaul should wait until after the general election on 12 December, the ACA said, adding that "input from experience practioners" and "cross-party deliberations and openness" are needed to achieve sustainable change.
ACA chairwoman Jenny Condron said: "It's vital that changes are properly considered and, if at all possible, that there is some cross-party agreement on the political and means by which they are delivered. Any major revisions must be robust and ensuring, enabling employees to plan for long term pension saving."
A reduction in the general annual allowance was also backed by survey respondents in favour of abolishing the tapered annual allowance.
Condron added employers' concerns about the complexity of the tax system are now "holding up sensible projects" including GMP equalisation.
""The findings in this trends survey have underscored employers' frustration. Reforms must be even handed and extend to resolving problems that impact on all wealth-generating sectors of our economy."
A total 44% of respondents (up from 30% in 2018) said the impact of current restrictions in relief have caused senior and high-income employees to leave their firms' pension schemes.
This means firms are vulnerable as the departures "disconnect more and more senior decision-makers from personal interest" in workplace pensions, the ACA said.
Condron added: "Key decision makers have opted out of involvement in their company pensions meaning many employers are deterred from establishing and maintaining pension schemes for their staff beyond the minimum required by auto-enrolment."
A total of 67% of the ACA respondents said any pension tax reform should target lower income groups, even if higher earners are worse off.
Both public and private works need a regime that is "simple", Condron said, along with promoting savings and not "disenfranchising decision makers" with "out of the blue" changes.
The results from the ACA survey follow the Office of Tax Simplification's call on the government last month to review complex tax measures.
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