Ernst and Young has developed a strategy to mitigate the impact on high earners of the pensions tax changes taking effect on 6 April.
The firm established that just over 40 employees will be affected by the reduction in the annual allowance from £255,000 to £50,000. As an interim measure, Ernst and Young will pay a salary supplement to affected staff. It has also sought agreement from HM Revenue and Customs that employees can change their pension contributions paid via salary sacrifice to avoid breaching the reduced annual allowance.
Employees affected by the change are members of a final salary scheme that closed to new members in 2003. Julianna Oladipo, pensions manager, UK and Ireland at Ernst and Young, said: “In the first year there will be a greater proportion of [affected] employees because of what they paid in the first six months.†
“On an ongoing basis, there will be a smaller group of staff where, by swapping their contributions, the firm’s own contributions alone still take them over £50,000. In that circumstance, the firm agreed to pay a salary supplement on a cost-neutral basis.”
Staff affected by the change to the lifetime allowance limit were offered one-to-one sessions with consultancy Mercer.
Ernst and Young has also put together personal statements for employees impacted by the annual or lifetime allowance changes. Data includes payments made to date, contribution levels, and recommended contribution rates going forward.
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