Governance
Taxing higher earner pensions opposed by PwC |
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| Governance | |
| Written by Paul Williams | |
| Friday, 26 February 2010 | |
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Government consultation on implementing new pensions tax proposals closes Wednesday 3 March.
Taxing higher earner pensions will effectively compromise the majority of workplace sponsored pensions say PriceWaterhouseCoopers (PwC). The proposals close on Wednesday 3 March. Three-quarters of employers say their motivations to provide quality workplace pensions have decreased as a result of the proposals. Taxing higher earners on employer-sponsored pension provision will have an adverse impact on pensions for all employees as companies become more reluctant to continue providing occupational pension arrangements overall. PwC suggests that the Government reduces the current ‘annual allowance’ to tax-effective pension saving rather than make wholesale changes to the existing tax framework Proposals for introducing new taxes on pensions for higher earners will lead to further deterioration of pensions provision for individuals in all earnings brackets and accelerate defined benefit scheme closures, according to PricewaterhouseCoopers LLP (PwC). PwC has submitted its concerns in response to the HM Treasury and HM Revenue & Customs consultation on implementing the proposals, which closes on Wednesday 3 March. Under the proposals, a benefit-in-kind charge will be levied on defined benefit (DB) accrual and employer contributions to defined contributions (DC) pension schemes for higher earners, affecting individuals with gross earnings in excess of £130,000 pa. Higher earners will also face reduced tax relief on their own contributions to DC arrangements. Consequently, many higher earners will stop participating in pension schemes. Additionally, employers have lost trust in the durability of the framework governing pensions and this is having collateral impact on occupational pension provision as a whole. Raj Mody, pensions partner and chief actuary, PricewaterhouseCoopers LLP, commented: “Increasingly frequent change to the pension framework and the uncertainty this creates has already dented employers’ inclination to support occupational pension plans. These new proposals will make it unattractive for higher earners to continue to participate in current company pension arrangements. This, together with a loss of trust in the framework governing pensions, means the impact will be felt by the whole workforce. “We are already seeing employers reconsider the role of the current pension scheme in their overall reward package. And we expect to see more defined benefit scheme closure announcements as part of companies’ annual results announcements over the next month.“
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