LONDON (23 November 2016) – Aon plc (NYSE:AON), has commented on today’s Autumn Statement by the Chancellor of the Exchequer.
On salary sacrifice changes
Jeff Fox, principal at Aon Employee Benefits, said:
“We are not seeing the death of flexible benefits today. Certain tax efficient arrangements are being phased out, with the Government pushing to see no difference between cash and benefits. Tax efficiency was always an added extra but organisations will continue to see the value in flexible benefits. For many employees value will come through engagement and offering choice.
“However, after years of prevarication it looks like the Government has finally taken some decisive action on salary sacrifice, and will continue to reduce the tax efficiency of offering benefits. Salary sacrifice remains, but a major step has been taken to move against a concept that Government regards unfair and costly to the exchequer. But as the Government tries to rip up the roots here, they may find they are dealing with knot weed.
“This will be a major headache for employers. Operationally the proposal will cause challenges due to the short-timescales for communications and payroll. It will also make it harder for businesses to offer a compelling and competitive benefit package. Organisations which do rely upon salary sacrifice to fund general benefits will be heartened that pensions, childcare, ultra-low emission cars and bikes are out of scope.
“Employees who have opted into the affected salary sacrifice schemes in good faith will have found themselves the wrong side of the taxation fence today. But it is good to hear that the Government has listened to representations and introduced a longer transitional phase for those already participating in salary sacrifice. Arrangements in place before April 2017 will be protected until April 2018. Those in company car arrangements will be protected until April 2021.”
On restricted Money Purchase Annual Allowance
Debbie Falvey, DC proposition leader, Aon Employee Benefits, said:
“The restriction on Money Purchase Annual Allowance (MPAA) to £4,000 for those in drawdown aims to close an existing tax loop hole, but it may also have a beneficial impact of discouraging those over 55 who may want to move funds into drawdown just to dip into pension for something like a daughter’s wedding. With the announced changes they should be incentivised to continue to save - which is a good thing for longer term pension planning.”
On the Annual Allowance and Lifetime Allowance
Matthew Arends, partner, Aon Hewitt, said:
“The tapered Annual Allowance and the Lifetime Allowance (LTA) both went without mention. This is disappointing both because of the practical problems with the Annual Allowance, and because a £1m LTA hits middle earners as well as high earners, and DC more than DB.
“The wide range of speculation of potential changes in relation to pensions tax and National Insurance all came to nothing bringing some much needed stability to members and employers.
“The Chancellor shrewdly deferred review of the triple lock to another day but raised the spectre of a review of taxation in light of increasing population longevity. It will be interesting to see whether this is a nod to further changes to State Pension Age.
“Last in the list of things that are not changing – and we were relieved to see it – is that although Insurance Premium Tax is increasing, long term products (including annuities) remain exempt.”
On competitive interest rates for savers
Lynda Whitney, partner, Aon Hewitt, said:
“We welcome the introduction of a competitive interest rate for savers but this means yet another addition to the list of savings options from which individuals need to choose - pensions, ISA, LISA, NS&I etc.
“Our latest research shows that employees put their employer at the centre of their pension savings decisions and with this increasingly complex environment they will need more help than ever to navigate the maze of saving possibilities.”
Notes to Editors
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