As predicted, there was not too much of note for the world of Employee Benefits in the Autumn Statement on 25 November (which is something of a relief!) – but one point did catch our eye. The Chancellor said: “Over 5 million people have already been auto-enrolled into a pension thanks to our reforms in the last parliament.
“To help businesses with the administration of this important boost to our nation’s savings, we’ll align the next two phases of contribution rate increases with the tax years.”
So this indicates that the first increases in the minimum contribution levels under Auto-Enrolment will now not be as previously set out by legislation and the Regulator. The first planned increase was due on the 1 October 2017, with a further increase on the 1 October 2018.
These increases will now move to tax years (which makes more sense) – and having just checked the supporting Budget document it will be the April “of the following year”. So this will move back a cost for both employers and employees by a few months – and will presumably be welcomed by all therefore.
This is of course an important point for employers as they finalise their pay and pension budgets for the next few years.
There was also another area of immediate importance for employee benefits in the Chancellor’s speech.
The introduction of Tax Free Childcare (the proposed replacement to Childcare Vouchers) has been pushed back to “early” 2017. Given the delay we were not really expecting any mention of the policy, yet this did feature briefly in the Chancellors speech. And having checked the Budget document there is a change to the proposed conditions of the new offering now in place. It now appears that “an upper income limit of £100,000 and a minimum weekly income level per parent equivalent to 16 hours (worked at the National Living Wage)”* will be the criteria to access this support.
This may add complexity to the issue – and in the final analysis may even result in yet more working parents being better off under the existing Childcare Vouchers regime rather than Tax Free Childcare. This is something we will only be able to analyse once the dust settles on these proposals.
We will watch this point with interest, and will report back when further detail is known.
This final point may well be the most significant.
Tucked away in the supporting document text were two items that could each be hugely important for the future of employee benefits.
The first relates to Salary Sacrifice – a mechanism used by a huge number of employers to provide a wide-variety of employee benefits. The document* said that:
“The government remains concerned about the growth of salary sacrifice arrangements and is considering what action, if any, is necessary. The government will gather further evidence. including from employers, on salary sacrifice arrangements to inform it’s approach.”
Immediately below this comment was another – not unrelated – point:
“At Summer Budget 2015, the government launched a consultation on the system of pensions tax relief. The government is considering the responses received and will publish its response at Budget 2016.”
Our feeling is that the salary sacrifice issue will be addressed after the pensions one – and may even become redundant depending on the solutions proposed for the pension tax relief system. Yet both these points above suggest another year(s) of major change lies ahead for employers and the benefits industry.
This article has been collated from a number of blog updates published around the Autumn Statement. For the full original articles and other similar posts please visit the Jelf Group blog http://www.jelfgroup.com/blog/.
* HM Treasury; Spending review and autumn statement
