McDonald’s has created a dedicated team to develop its strategy for the 2012 pension reforms and has looked at ways to mitigate the impact of changes in pensions tax for high earners.
The fast-food chain is arranging company-funded sessions with consultancy Towers Watson for the 17 members of its executive team who could be affected by the tax changes to explore what impact the reduction in the annual allowance (from £255,000 to £50,000) and the lifetime allowance (from £1.8 million to £1.5 million) will have on them. The annual allowance change will be fully enforced in the 2011-12 tax year, while the reduced lifetime allowance comes into effect on 6 April 2012.
Neal Blackshire, benefits and compensation manager at McDonald’s, said the employees most likely to be affected were in the firm’s defined benefit pension scheme, which has been closed to new joiners for about 10 years.
“This is as much to do with long service as it is about salary levels,” he said. “We have a very long-service culture here, so we have a number of people with 20-plus years of service. There is a big enough combination of salary and service that even a relatively modest increment in pensionable salary could trigger a situation where an employee is very close to, or just above, the £50,000 annual allowance.”
Blackshire said the company’s aim was not to compensate staff for the changes, but to help them understand the impact and what they could do to reduce it.
The cross-functional team comprises representatives from its communications, finance, HR, legal and payroll departments.
It will determine McDonald’s strategy for auto-enrolment, compulsory employer and employee pension contributions, and whether to make use of the incoming national employment savings trust (Nest).
So far, the team has established that the firm’s stakeholder pension scheme will require only a minor tweak to comply with the pension reforms due to come into effect in 2012. It has already met with representatives from the Nest Corporation and the next meeting on its agenda is with the company’s pension provider.
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