Tax changes for high earners are the highest priority for delegates at the Employee Benefits Summit in Monte Carlo.
A fifth of delegates said this issue (which comprises a new 50% tax rate for employees earning above £150,000 a year and a reduction in tax relief on pensions for higher earners) was currently their biggest challenge, while 16% said pay and bonuses were their top concern.
Speaking in a panel debate on the second day of the summit, Caroline Jowett-Ive, group vice president reward at Travelport, said: “For a number of our high earners, they are seeing every part of their reward package diminishing and it is beyond their control. But they are being expected to work harder.”
John Chilman, group reward and pensions director at First Group, added: “Giving someone a small pay increase can knock £20,000 off their take home pay.”
Employers face a number of challenges when reviewing their remuneration for high earners. Even identifying who is affected can be problematic, said Chilman.
“The big challenge is I do not really know who is going to be affected. I do not know who has property or has invested in a share portfolio and that is coming into the income stream.”
A lack of clarity around the regulations and possible Budget changes on 22 June also mean employers are waiting for clarification on what exactly they will be able to offer. Ralph Turner, pensions and benefits director at Mars UK, said: “One frustration is the [pensions tax] change comes in in April next year and we have no idea what we will be allowed to do.”
But some employers are viewing the need to address this issue as an opportunity to review their reward package for their entire workforce. Just under a third (23%) of summit delegates said this was the approach they were taking. Chris Coyne, group head of reward at City and Guilds, said: “It is clearly a big problem, but we should look at this as an opportunity to review [our approach] to [employees’] saving.”
He added this could include considering whether pensions remain the most appropriate savings vehicle.
Mars UK is also taking the opportunity to review its pensions provision as a result of the changes to the tax charges for high earners, said Turner.
Employers could also use the changes as an opportunity to communicate the importance of pensions planning to lower-earning staff, particularly if they are on an aspirational career path, said Jowett-Ive.
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