- Identify which employees will be immediately affected by the reduction in the Annual Allowance (from £255,000 to £50,000 from 2011/12) and the Lifetime Allowance (from £1.8m to £1.5m from 2012/13).
- Identify options for changes to pension arrangements to address the impact of the tax changes. For Defined Contribution schemes, this could include restricting total contributions to the Annual Allowance and re-designing contribution rate structures. For Defined Benefit schemes, this could include a change to the definition of pensionable pay.
- Consider whether to compensate employees whose future pensions savings will be restricted through alternative forms of remuneration.
- Communicate with affected employees so that they are aware of the changes. This could include written communications and/or offering affected employees access to Independent Financial Advice to help employees understand how they personally are affected.
- Confirm whether a convenient Pension Input Period (“PIP”) has been nominated for all scheme members. If no nomination has been made, consider making a retrospective PIP nomination by April 5, 2011 and update new joiner communications to state details of the chosen PIP.
- Communicate with those employees able to take advantage of the opportunity to make substantial Additional Voluntary Contributions (“AVCs”) before the end of the 2010/11 tax year. This may be attractive to employees anticipating a sizeable year end bonus and the scope for this will depend on the chosen PIP and on the extent to which individuals have scope within the special annual allowance. Some employees may also have scope to make sizeable additional contributions in the 2011/12 tax year as a result of carrying forward “unused” Annual Allowance from previous years.
- Identify which employees are not immediately affected but may be affected in future by the change to the Annual Allowance and Lifetime Allowance under certain scenarios.
Share this story