No fundamental reform to pension tax relief in Budget?
The UK Government has indicated that there will be no fundamental or even incremental changes to pensions tax relief, saying there is “no clear consensus” for reform.
In a new report, the Treasury select committee called for a big rethink of pensions tax relief. However, in a response to the report, the Government said there was no clear consensus for changes to the system. The response added “The government is also aware that any changes to the pensions tax relief regime could have significant impacts for schemes, employers and individuals”.
DB trust-based pension schemes research
New research for the Pensions Regulator summarises the findings from the 2018 quantitative survey among defined benefit (DB) schemes, carried out between 1 and 27 March 2018. The survey was conducted by IFF Research, an independent market research agency, on behalf of The Pensions Regulator (TPR). Additional qualitative interviews were undertaken with 27 trustees to better understand the answers they gave in relation to two of the principles (Balance and Fair Treatment) in the original survey.
Key findings are:
- The majority of trustees and employers had read the DB code of practice or a summary of it.
- In relation to the Working Collaboratively principle of the code of practice, the large majority of schemes met each of TPR’s expectations asked about in the survey. Trustees boards of small schemes performed worse than large schemes on engaging with the employer before starting the valuation process.
- In relation to the Managing Risk principle, nearly all schemes met two of the three expectations that TPR has. However, like in 2017, a significant minority did not meet the expectation to manage risks in an integrated way.
- In relation to the Taking Risk principle, the large majority of schemes met each of TPR’s expectations, although small schemes performed more poorly.
- In relation to the Taking a Long-term View principle, the vast majority of schemes have identified which employer(s) are legally liable to support the scheme, while fewer schemes had a defined aim for a journey plan.
- In relation to the Balance principle, most schemes reported that they meet each of the two elements asked about relating to paying promised benefits and reviewing the sponsoring employer’s proposed investments.
- In relation to the Fair Treatment principle, approaching two thirds of trustee boards (62%) had undertaken activities to secure Fair Treatment for the scheme, a significant reduction on the 72% found in the 2017 survey.
- In relation to the Reaching Funding Targets principle, nearly all trustee boards told us that they took into account at least one factor when considering the structure of a recovery plan or had no need of a recovery plan.
- Two thirds of trustees (67%) recalled receiving the 21st Century Trusteeship campaign emails from TPR. These were largely perceived as clear and useful. Half of these (50%) claimed to have taken action based on them, equating to a third (33%) of all scheme trustees.
- On average, schemes met six of the eight standards that the 21st Century Trusteeship campaign focuses on.
Updated salary sacrifice guidance
HMRC’s salary sacrifice guidance has been updated to provide information about the effect of employees changing from childcare vouchers to the new tax-free childcare scheme.
Employers must stop giving employee childcare vouchers with income tax and National Insurance reliefs if they start using the new tax-free childcare scheme. This may mean stopping or changing a salary sacrifice arrangement.
HMRC clearance team contact details have also been updated.
John W. Wilson LLB(Hons) FPMI ACII, Head of Research| Email: email@example.com
Stephen Williams, Senior Research Consultant | Email: firstname.lastname@example.org