Susan Ball

Written by: Susan Ball

Susan Ball

Partner

Pensions: what more can be done to help employees?

The OTS paper issued on 10th October called ‘Taxation and Life Events; Simplifying tax for individuals’ notes that out of the £256bn raised in tax in 2018-19, £162bn was PAYE. With three of the five key events covered are impacted by the PAYE system: starting work; saving for a pension; and drawing a pension.

It’s clear that despite previous Government good intentions to simply the tax system, it is becoming more complex and employees are finding it harder to understand the rules and how they should apply them. From the claiming of expenses relief via form P87 or a tax return to the difficulties of the pensions annual allowance, taxpayers feel an increasing need to hire professional advisers to make sure they do not suffer unexpected tax bills or fail to claim allowances to which they are entitled.

The Queen’s speech covered the proposed changes in the Pensions Bill which brings together the Government’s proposals from the 2018 Budget and various subsequent consultations, but there’s more to it than that. A key area is the pensions dashboard which will allow millions of individuals with multiple pensions in which they’ve built up benefits over their working lives for the first time to see all of these, online at the touch of a button. 

The pensions dashboard has been continuously pushed back since it was proposed in 2014, and many in the industry believe that its introduction is the most important area of the Pensions Bill to improve the member experience.

The bill also includes: 

  • proposals to grant more power to the Pensions Regulator (TPR) to tackle the issue of unscrupulous employers and collective defined contribution (CDC) schemes;
  • more options for employers to support their employees, including saving collectively and sharing investment and mortality risk; and
  • improving advice for savers so they can prepare for retirement with confidence.

While this is welcome, the OTS report also emphasises that further changes might have to be made to the current complex rules to make sure that people save adequately for a pension and that employers have the necessary degrees of flexibility. The recent consultation on the ways the NHS pension scheme works demonstrates the problems which these complex rules are generating. 

However, even if the government doesn’t listen to all the proposals from the OTS, hopefully it will agree that better and more accessible HMRC guidance is needed to help taxpayers meet their obligations. 

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