In the Budget in March last year, George Osborne announced that these allowances would be reduced from 6 April 2016, and conservative estimates suggest that these reductions will affect many more than 300,000 employees across the UK, who may incur a tax bill if they breach these limits.
Many will now need to review their pension plans and consider if and when they will break through these new allowances. However, the Close Brothers Business Barometer, which questions over 900 employers across the UK, found that most businesses have not yet taken steps to help staff who will be affected to understand these changes and how to plan around them.
This contrasts to the wider support companies have put in place around retirement planning since the pension reforms, with a third (30%) of employers having introduced broader pension engagement for all staff, while 14% are offering specific retirement seminars to help staff to navigate the changes. There is an increase in this support, up from 25% and 12% respectively in October, showing a recognition amongst businesses of the need to help their employees make informed decisions on their retirement plans.
Meanwhile, one in six (17%) are offering specific support for staff who are already ‘at retirement’, and 36% are offering access to advice.
Jeanette Makings, Head of Financial Education Services at Close Brothers Asset Management, said: “The pension reforms themselves have heightened the need for financial education as with greater choice comes greater complexity and individuals need to be aware of the impact on their finances and need more guidance to make good decisions. With even more policy changes ahead, such as the reduction in the annual and lifetime allowances, it’s vital that employees are aware of how they could be affected, and importantly how to plan around it. Employers are in a unique position to play a central role in helping their employees to understand and make the right choices. Addressing new reforms as they come along can easily be built into existing financial education programmes. Once introduced, it can lead to a workforce which is confident, knowledgeable and far more productive throughout their career and greater brand ambassadors on leaving.”
Just 3% of employers are helping staff understand the new Lifetime/ Annual Allowance
With the end of the tax year approaching and the reduction to the Annual and Lifetime Allowances (AA/LTA) to be implemented from 6 April, just 3% of employers are offering specific support for staff impacted by the change, according to the latest research from Close Brothers Asset Management.
