Around a third (32%) of London-based financial services organisation respondents are not providing additional flexibility for employees who may be affected by the changes to the annual and lifetime pensions allowances, according to research by Punter Southall Aspire.
Its Taxing times for high earners report, which surveyed 50 London-based financial services organisations such as banks, insurance organisations, investment firms, private equity firms and asset management organisations, also found that 21% of respondents are not allowing employees to take cash in lieu of pension contributions.
In April 2016, the lifetime allowance was reduced from £1.25 million to £1 million. The government also reduced the annual allowance so that those earning between £150,000 and £210,000 a year face a tapered annual allowance for tax relief from £40,000 to £10,000.
The research also found:
- 28% of respondents have capped contributions for their staff at £10,000 in response to the tapered annual allowance.
- 52% of respondents who offer a cash allowance deduct the national insurance that is due from the cash allowance.
- 68% of respondents have not reviewed their life assurance arrangements in light of the reduced lifetime allowance.
Alan Morahan (pictured), managing director of defined contribution (DC) consulting at Punter Southall Aspire, said: “The fact a third of financial services [organisations] haven’t provided any additional flexibility to their employees in light of these tax changes is worrying.
“Many employees are in the dark about their options. They are either continuing to make their pension contribution, which could lead to a potential tax liability or have ceased their contributions altogether, without any cash allowance in lieu of their employer contribution. Some are oblivious to the implications of the tax changes and are sleepwalking their way towards a substantial and unexpected tax bill.”