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Eversheds comment: Care and caution required before further radical changes to UK pensions landscape

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  • United Kingdom

    18-02-2016

    Commenting on the Centre for Policy Studies' view that UK Chancellor George Osborne should scrap some pension giveaways in next month’s Budget, Francois Barker, head of pensions at law firm Eversheds, says:

    “The Chancellor should take care before making any further radical changes to the UK pensions landscape. A move to pension ISAs or fixed rate tax relief sounds simple but would create significant complexity and could actually act as a disincentive to saving. Both options would involve taxing individuals on their employer contributions (something which does not currently happen). This could increase an individual’s tax bill significantly, particularly if they are in a defined benefit scheme. It will also push many more people into the higher rate tax bracket.

    "The Chancellor also needs to be careful not to undermine the incentives for employers to offer decent levels of pension provision. Employers have been hit with numerous changes to the pension system in recent years and they are still grappling with automatic enrolment, freedom of choice and the impact of the new tapered annual allowance on their higher paid staff. The tapered annual allowance already risks disenfranchising higher earners and senior management from pension saving. If these people are hit again in the Budget it risks undermining the strategic value of pensions for UK plc. This would be bad news for everybody.”

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