View more on these topics

Number looking to gain from tax advantages ‘grossly underestimated’

Research from Jelf Employee Benefits and retirement workshops specialist LaterLife Learning shows that one in two employers could offer their older workers greater remuneration flexibility so that they can benefit from the new Freedom of Pensions rules.

The new legislation, which is due to come into force in spring 2015, will allow older employees (those over the age of 55) to access defined-contribution retirement funds in any format they desire. It follows that employers could redirect salary payments for such employees directly into pension savings with both parties avoiding National Insurance (NI) liabilities and with the employee still having full immediate access to their funds as required.

It has been estimated that this remuneration option could cost HM Treasury up to £20bn* every year despite the proposal to limit this practice set out in the government’s response to the consultation in July 2014.

Jelf’s research among circa 200 employers asked if they would allow such flexibility. Thirty-five per cent of respondents indicated that they would offer this for all employees over the age of 55, with a further 15 per cent willing to consider this on a case-by-case basis. Only six per cent would not offer this option.

Commenting for Jelf Employee Benefits, Steve Herbert, head of benefits strategy, said: ‘Our research shows that the appetite for this remuneration option may well have been grossly underestimated by the legislators. It remains to be seen if the rules will be tightened to avoid this practice becoming widespread, and if so how this can be achieved without damaging the concept of freedom of access to pension funds.’

The research also found that the new pension freedoms are likely to appeal to older employees. The survey of employees who had recently retired found that 22 per cent would have used the greater access and flexibility regarding pension funds had it been available when they retired. Yet the number could be higher, with another nine per cent still able to utilise this flexibility and a further 30 per cent not sure.

The 2014 Jelf Employee Benefits Survey research also found that:

  • 78 per cent of employers haven’t yet made their employees aware of the proposed changes to pensions fund access, although the majority (67 per cent) are gearing up to do so; and
  • 69 per cent of employers don’t currently offer pre-retirement courses to their staff.

Jelf is concerned that this lack of communication and support from employers leaves employees potentially exposed to making poorly informed choices that could potentially devastate income options for employees’ retirement years.

Tony Clack, managing director for LaterLife Learning, said: ‘There has never been a time of greater change within pension legislation. Added to the removal of the default retirement age, this increases the complexity of decision making and consequently the need for greater retirement education to assist with both financial and lifestyle decisions. As a result, we are seeing unprecedented demand for our retirement courses, as more and more organisations recognise the necessity to assist their employees in preparing for retirement.’

Recommended

Stephen-Smith-MM-Peach-700.jpg

Stephen Smith: Brokers, time is on your side

We have seen plenty of misplaced MMR scare stories in recent months. Contrary to reports, restaurant receipts are not being pored over in forensic detail and a borrower’s gym membership is not likely to stop them getting a mortgage. However, amid the hysteria, there has been one tangible effect. With banks now required to offer […]

10

PFS urges advisers to address ‘opaque’ charges

Advisers must make charging models as transparent as possible to turn around the public’s perception of the industry, says the Personal Finance Society. PFS chief executive Keith Richards says potential customers have been turned off financial advice by “opaque” charging structures. He says: “There is a common thread, coming from the FCA on its disclosure […]

HM-Treasury-500x320.jpg
10

Treasury threatens clampdown over pensions recycling abuse

The Treasury has threatened to clampdown on pensions recycling amid concerns the tax loophole could cost the Exchequer billions of pounds. Under the new flexibilities announced in the March Budget, anyone aged 55 or over will be able to take their entire pension pot as cash from April next year. The reforms create a tax […]

Santander award win 2014 620x430.jpg

Money Marketing scoops four personal finance media awards

Money Marketing won a total of four accolades at this year’s Santander Media Awards, including financial trade title of the year and trade website of the year. Money Marketing regulation reporter Tessa Norman was named as the winner of the judge’s award for trade article of the year, for revealing that the FCA had overcharged […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment

    Close

    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm

    Email: customerservices@moneymarketing.com