A survey by Aon Hewitt of over 300 pensions professionals has indicated that companies are seeing the April 2011 deadline for changes to pensions taxation as achievable but definitely challenging. Nearly a quarter of the survey respondents said they were not confident of being adequately prepared, citing issues with scarce pension resources. The survey was carried out last week as part of an Aon Hewitt teleconference to discuss the recently announced changes.
Tony Baily, principal consultant at Aon Hewitt and leader of its pension taxation team, said:
“It was clear from the response on our teleconference that these tax changes pose substantial challenges for companies. Between now and next April, companies need to review their pension remuneration and reward policies for the high earners who are affected by the tax changes, make their policy decisions and then communicate the changes in order that members can make informed choices.”
“Given that two fifths of the survey respondents indicated they had between 10 and 100 members impacted by the tax changes, it’s clear that this is not a trivial task. Companies need to get policies, communication and administration support lined up to deal with a change of this magnitude. And remember – this is their key talent that is being affected.”
Tony Baily continued: “Although the new tax regime starts in April 2011, for some pension schemes the reduced Annual Allowance of £50,000 already applies. This makes the need for a review of existing arrangements and member communication even more pressing. It’s a complicated picture that will need careful individual handling.”
Dealing with the changes will also trigger considerable administrative change. June Grant, a principal consultant in the Aon Hewitt Benefits Practice said: “Schemes will have to decide whether to take a proactive or reactive stance to dealing with the new disclosure requirements and the provision of data to members to compute their pension inputs. With a handful of cases you may be able to deal with ad-hoc requests but for larger numbers a more structured approach will be required. For some it may make sense to realign your scheme year-end with the tax year and change the format of annual benefit statements to be as helpful as possible to your members.”
More positively, the proposals from HMRC offer some welcome changes from previous proposals and give significant flexibility for schemes. Tony Baily said:
“I was quite surprised that over half of the pensions professionals on our call said they had no intention of changing their scheme benefit design to take advantages of some of the new features. This is understandable for pure DC schemes – where a simple cash alternative saving is an obvious solution – but many DB schemes may be missing the full opportunities that the new rules offer.
“We would urge schemes to think about their options in the near future, in order to take advantage of some of the very attractive opportunities that the new regime offers.”
Source : Aon Hewitt Press Release
