Company pension schemes could face a major overhaul soon ahead of next year’s changes to tax relief for higher earners.
Hymans Robertson, independent experts in benefits and investments, have released a report urging employers to act now to make alterations to company pension plans in time for the new rules, which they describe as "hideously complex".
The legislation will end pension tax relief for employees with a total taxable income of more than £130,000 and could also hit employees with salaries of around £90k once other taxable income is taken into account.
Every employer will need to change its approach to retirement provision to accommodate high earners, but Hymans Robertson is warning that changes need to begin now.
Chris Noon, partner at Hymans Robertson, said: “Unfortunately both employees and employers struggle to understand the hideously complex new rules that the Government has put in place.
“As the government has limited tax relief to 20% on contributions for high earners, many people could face an overall tax rate of as much as 70% on their pension. For many senior employees this make a pension an irrelevant form of retirement saving.
“It is also important to ensure that this complex legislation doesn't threaten employers' attitudes towards pension benefits for employees on lower salaries. For these individuals traditional DC and DB pension schemes are still an attractive proposition so it's vital that employers understand the impact of the new legislation across the entire workforce and can offer a suitably tailored solution.”
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