Treasury note reveals £10m IFA bill for pension tax relief changes
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Complying with the Government’s plans to restrict tax relief on pensions for high earners will cost IFAs £10m.
The impact assessment, published alongside yesterday’s Budget, says financial advisers will incur costs in becoming familiar with the new rules and undertaking one-off training to enable them to provide appropriate advice following the changes to the pension rules.
The Treasury’s estimates assume advisers will spend an average of between 8 and 48 hours across small, medium and large organisations becoming familiar with the new rules at a wage of around £50 per hour.
Training is expected to cost around £500 per adviser, assuming 1, 10, and 50 individuals will undertake training within small, medium and large financial adviser organisations, respectively. The total one-off compliance cost for financial advisers is estimated at around £10m.
The impact assessment also revealed that the Treasury has trebled his estimate of the one-off costs that pension schemes, employers and individuals will incur as a result of the tax on higher earners’ pension contributions.
It estimates the one-off costs incurred during the transition to the new regime will total £900m or around £3,000 for each of the 300,000 taxpayers affected. This compares to the £305m estimate published in December’s pre-Budget report.
Employers’ one-off costs are now expected to be £330m rather than £40m. Annual costs are now expected to be £115m rather than £90m.
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Readers' comments (16)
Paul Violet | 25 Mar 2010 4:18 pm
No comment possible.
I'd have my broadband cut off!
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Steve Laird | 25 Mar 2010 4:24 pm
Pensions simplification has failed so they must be trying pensions complication now.
Wealthy clients who were happy-ish paying tax are now fed up and actively seeking ways to avoid it. I predict that the overall effect will be to reduce HMRC income, not increase it.
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Mark Coughlin | 25 Mar 2010 4:26 pm
Good job we have pensions simplification!
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Michael Fallas | 25 Mar 2010 4:32 pm
These new rules are just madness and make the situation highly complicated.
If this is "pension simplification" then roll on "pension complication"
Nuts from the looney farm as usual
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Julian Stevens | 25 Mar 2010 4:39 pm
As I understand it, all this isn't actually law yet, so there may just be the possibility that the next government will sweep it all away or, at the very least, replace it with a ceiling relief rate of 35%. Wouldn't that be vastly more palatable and less complicated and expensive for everyone? Of course it would, but Labour is constitutionally incapable of thinking that way. The sooner they're out, the better. Almost any alternative to Crash Gordon has to be better. A very dangerous man who's done a very great deal of damage to the economy and to the lives of those who have to function within it.
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Julian Stevens | 25 Mar 2010 4:39 pm
As I understand it, all this isn't actually law yet, so there may just be the possibility that the next government will sweep it all away or, at the very least, replace it with a ceiling relief rate of 35%. Wouldn't that be vastly more palatable and less complicated and expensive for everyone? Of course it would, but Labour is constitutionally incapable of thinking that way. The sooner they're out, the better. Almost any alternative to Crash Gordon has to be better. A very dangerous man who's done a very great deal of damage to the economy and to the lives of those who have to function within it.
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Ian | 25 Mar 2010 4:45 pm
I presume Darling Gordon worked this calculation out with his crayons and the back of the fag packet he used for the budget.
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Anonymous | 25 Mar 2010 4:52 pm
How much time and how much money has that assessment cost? What is the benefit from the information obtained? Its all a load of 'justify my salary' twaddle. Most of us just get on with it because the learning has to be done anyway. Right now £50 an hour would go down nicely thank you! Thank God I shall be off soon.
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Gerry Cooper | 25 Mar 2010 5:20 pm
Am I alone in trying to work out how the hell this cost figure has been arrived at?
The number of clients with whom I deal who will be affected by the new restrictions - precisely nil!
I know that doesn't mean I don't have to be aware of and understand the rules, but I won't be devoting an enormous amount of time to this right now.
I do of course sympathise deeply with all the advisers with only high net worth clients, and agree with the comments made, but what proportion of the overall IFA community do they represent?
Presumably too, the higher fee income at this client level is sufficient compensation for the additional work?
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Peter Herd | 25 Mar 2010 5:41 pm
Hi Guys if you can not read the budget report online and take note of the changes you should not be in the industry. Tax changes each year and why is it that people in this industry bellyache all the time. We all earn a good living so stop whingeing.
I actually think that the budget creates opportunity as people will need to sit down with experts like us more regularly to review their affairs. Reviews normally equal money after all.
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