Pension changes - will your top talent lose out following April's pension changes?

The pensions world has faced some radical changes in recent years, and 2016 has again seen further changes relating to the Lifetime Allowance and Annual Allowance. 

Will my employees be affected?
These new pension rules are likely to impact your higher earners and employees who have larger pension pots rather than your entire workforce, however, the rules are made more complex as the annual allowance will now look at 'adjusted income' rather than simply an employee’s salary.  This includes employer pension contributions, salary sacrifice, commission, income from a pension and also includes any other taxable private income they may receive from savings, investments and buy-to-let income.

Annual allowance explained
A tapered annual allowance has been introduced for individuals with an adjusted income of over £150,000.

The £40,000 annual allowance will be reduced by £1 for every £2 of adjusted income above £150,000 until it reaches £10,000 for adjusted incomes of £210,000 and above.

Lifetime allowance explained
The lifetime allowance has reduced from £1.25m to £1m and anyone who breaks through this £1m threshold may be liable to 55% tax on any money that they take out of their pension pot over the new lifetime allowance of £1million.   And an unintended consequence is that most group life assurance benefits paid out will count toward the £1m lifetime allowance*.

* 90% of death in service benefits are classified as ‘pension arrangements’. Source: Canada Life. Based on figures from 14,000 group life assurance schemes

What shoud I do to help my high earners?
There are a number of steps an employer can take:
1. educate them;
2. put in place a robust system to safeguard the interests of employees who have
    previously applied for fixed protection.
3. agree a flexible pension contribution strategy for affected employees;
4. introduce a new-joiner consultation process for high earners; and
5. explore the death in service ‘excepted scheme’.

We’ve put together a guide that explains the changes and what you should be doing to protect your top talent from the impact of these changes.

Please complete the form below to request your free copy of our guide.  We will email it to you shortly.

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