Three-quarters (75%) of employers would support changes to the pensions tax relief system if this would provide more help to lower income employees, according to research conducted by the Association of Consulting Actuaries (ACA).
Its 2018 Pensions trends survey, which polled 349 employers, also found that 59% of respondents believe the current pension tax structure is too complicated and needs simplification.
Jenny Condron, chair at the ACA, said: “Pension tax relief remains an important part of social policy and should reward and encourage employers, employees and the self-employed to lock money away.
“What our survey found is that very few are happy with the way the current pension tax regime is working. In short, it has been corrupted by numerous tweaks so it is no longer ‘fit for purpose’. We struggle across the professions to find anyone who fully understands and says they can reliably administer the rules now in place. That is frankly a ridiculous situation.
“Issues like the gap between [defined benefit (DB)] and [defined contribution (DC)] pension taxation also need to be addressed. It cannot be fair that the outcomes for DB and DC members can be so different under the lifetime allowance in place or that DC members can suffer penalties for investment out-performance.”
Around four-fifths (78%) of respondents think that the tapered annual allowance should be re-thought, while 53% feel that the lifetime allowance should be abolished. In addition, approximately 33% of respondents agreed that the changes and increases in pensions taxation over recent years had caused senior staff to leave organisations’ pension schemes, led to pressures to revise available pay and benefits packages and caused employers to reconsider their pension arrangements.
Condron added: “Employers want the government to simplify the regime, not in a rushed and rather disorganised way as was the case in 2015, but carefully by way of a cool and calm ‘open’ consultation and review post-Brexit.
“The aim should be to re-establish a stable, transparent tax regime that rewards and encourages employees on all incomes to save for later life, [while] also encouraging employers to play their very important part. Rightly, the government should be able to cap the amount of tax relief pensions enjoy, but importantly it must restore a long-term confidence that the goal-posts won’t move year in, year out. Ideally and optimistically, it would helpful if there was some cross-party support for such an initiative.”