On the go: Pension specialists have welcomed the announced changes in pensions tax relief in this week’s Budget, but have pointed out that it brings an added administration challenge to schemes.
Speaking to attendees at the Pensions and Lifetime Savings Association’s investment conference in Edinburgh, Rob Orr, head of technical and communications at Saul Trustee Company, noted that the government’s decision to increase the tapered annual allowance threshold by £90,000 has not “removed the complexity of that calculation”.
“What that leads to, from an admin perspective, is that it is difficult to calculate, but just as equally it is difficult to explain to members – what it is and how it works.”
Chancellor of the exchequer Rishi Sunak announced on Wednesday that the tapered annual allowance threshold income will rise to £200,000 from the current £110,000.
Mr Sunak also announced measures to reduce the minimum annual allowance to £4,000 for those with incomes above £300,000.
Mr Orr added that making a tax change from April 6, which is only in three weeks’ time, “doesn’t leave an enormous amount of time for schemes to crack on and make the changes they need to, and to speak to affected members”.
Laura Myers, head of defined contribution at LCP, also present at the conference, noted that it is beneficial that less individuals will be caught by the tapered annual allowance.
However, this does not solve the problem of members who have opted out and will potentially be missing out on more pension savings, and all the complexity around changing pension scheme systems and communications, she said.
“While I appreciate this only impacts higher earners, it is more work – more admin work – for those of you who are running pension schemes. It is disappointing, abolishing it all together would be my favourite option,” Ms Myers added.
