'Disturbing' number of employers failing to give any thought to A-day rules
A “disturbing” number of companies are still to take action a year on from the introduction of new rules around pensions, a trade body claimed this week.
GRiD, which represents the group risk and protection industry, said it believes that around 36% of employers have done nothing to meet transitional arrangements that were introduced in April of last year to give employers breathing space to move to the new A-day regime.
A-day, which came into effect in 2006, signalled the most radical change in pension tax laws in recent history, introducing a single tax regime to replace the eight previous ones.
But in spite of HMRC’s decision to allow employers several years to make new arrangements to comply with the new regime, GRiD said that a further 30% of employers are still undecided on what action to take, in spite of that “breathing space” expiring this time last year.
Changes introduced by A-day include the removal of the earnings cap which had been introduced in 1989 to set a further limit on the salary that could be used to calculate benefits. The lifetime allowance was also reduced from £1.8m to £1.5m, meaning that there will be some additional issues around employers taking action for those with death benefits over £1.5m to protect their previous position.
GRiD said that unless employers and trustees take action, they continue to inadvertently face increased or uninsured liabilities and unbudgeted costs.
The potential uninsured liabilities for dependants’ death in service pensions are even greater as they fall outside of the lifetime allowance and thus will be “completely unconstrained” unless action is taken, GRiD said.
Katharine Moxham, spokesperson for GRiD, said: “It’s disturbing to see just how many employers have failed to give any thought to how they deal with the removal of the earnings cap. If they don’t act now, they continue to risk potentially crippling uninsured liabilities”
The research found that 15% of employers questioned had opted to put a salary cap back into their schemes and a further 11% have removed the earnings cap all together.