Updated laws require pension rethink

News Article - 24 May 2010
Category: Business

Employers have been warned to change their approach to pension provisions to better accommodate high earners due to updates to tax relief legislation that will enter statute books in April 2011. Earners with pre-tax incomes over £130,000 will be affected by the changes; this will hit those earning salaries of around £90,000 once all taxable income streams have been accounted for.

The scale of change and level of action required by employers is therefore significant, and experts are advising companies to start preparing now to respond effectively in April next year when the new laws take effect. Defined-benefit schemes are likely to be the most severely affected, and businesses operating these types of programmes will most likely require more stringent preparations to be taken.

Following the change, Cash and Employer Financed Retirement Benefits Schemes (EFRBS) are likely to be the most popular and most tax-efficient retirement solution for high earners. Defined-benefit schemes will continue to be tax-efficient for employees on lower salaries, forcing employers to consider overall pension strategies and the impact of legislation to ensure employees in different salary bands have access to the most financially efficient method of saving.

In light of the proposed reforms in April, employers will no doubt be keen to investigate the most appropriate savings vehicles for high-earners to ensure key talent is not lost to competitors. The picture is slightly complicated by the provision of anti-avoidance legislation which the Government is looking to toughen from April 2011 onwards. Employers must both satisfy high-earners that pension policies provide the best financial return, whilst at the same time ensuring they operate within legal limits.

It's also likely more tax-related legislation will be pushed through to help increase tax take and reduce the spiralling budget deficit. Businesses must ensure they can cope with the logistical effects of new taxation legislation, whether it affects pension provisions for high earners or other key areas such as VAT.

Access offers a fully integrated software solution that enables businesses to stay ahead when legislation is updated or reformed. Regular updates are automatically applied system-wide, ensuring all business divisions remain compliant. Specific functionality, such as VAT reports and VAT returns software, enable companies to submit important documents in the relevant legally compliant format.

For more information, please call Access on 0845 345 3300.

 

---

More industry news

• Banks defend lack of lending with new taskforce
• Fallout begins from public spending cuts
• Only 4% of staff would approach manager with health concerns
• CFOs in dark about carbon management spend
• UK car production falls
• New CRC standards will benefit top performers
• Employee engagement at ‘all time low’
• Finance leaders back green reporting standards push
• UK worker productivity linked to performance bonuses

Back to news home page »