Pensions tax relief for higher earners a ‘challenge’ for employers

Almost 40% of employers have indicated the issue of pensions tax relief for their higher earners is now a challenge, according to new research from Smarterly.

The online savings and investments platform provider suggested these employers have started to look for other products to support the needs of their employees.

Smarterly’s research also revealed that 96% of companies have come up with initiatives to deal with higher earners, including offering cash alternatives.

The research was based on responses to an online survey in October and November 2019 amongst 250 respondents with decision-making powers over pension plans in companies with over 300 employees in the professional services, financial services, technology and legal sectors.

Smarterly also highlighted that since 2016, anyone earning over £150,000 finds themselves limited in the amount they can contribute to a pension scheme, unless they want to pay a high tax charge.

Less than 3% of surveyed employers indicated that they do not have any employees who are affected, with Smarterly describing the impact of the higher tax bracket as ‘far reaching.’

“The fact is that pensions for higher earners can’t be the only source of retirement funding and ultimately income,” Smarterly head of proposition, Steve Watson, said. “The introduction of the tapered annual allowance has seen to that. Moving forward, a retirement fund is likely to consist of a pension supplemented by other savings vehicles such as ISAs. The move is inevitable.

“But this dual approach isn’t just for higher earners. Many employers are introducing the approach for all employees to address issues such as poor engagement levels with pensions and a lack of accessible funds.”

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