Employee Benefits/Towers Watson Flexible Benefits Research 2011: Impact of legislation

Forthcoming pension reforms and changes to high earners pensions tax relief have affected attitudes to flex, but some employers are still unsure, says Jennifer Paterson

A significant number of employers still do not know how the 2012 pension reforms have affected the way they view pensions in relation to flex. In 2010, 32% of respondents said they were not sure how the changes, which include auto-enrolment, had affected their view, and this year’s figure is only slightly lower at 31%. In 2009 it was 45%.

This year’s research shows 36% of employers are considering introducing salary sacrifice around pensions and flex, while 24% will look at using flex to ease the impact of the pension changes.



With the introduction of the 50% tax rate for employees earning more than £150,000 a year last year and the reduction of the annual allowance for tax-free pensions to £50,000 coming into effect this April, employers should be looking at alternative options to reward high earners. However, two-thirds (67%) of employers say that they would not consider using a flexible benefits scheme to mitigate the tax changes for high earners.

Among those that will consider using flexible benefits plans for this purpose, corporate individual savings accounts (Isas) are the most commonly considered option. This is followed by options such as offering benefits as an alternative to pension contributions, a cash-back alternative, or alternative defined benefit (DB) pension arrangements.



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