Half of employers are looking to exploit tax advantages arising from the new pension freedoms, which the government has ‘grossly underestimated’, according to a survey by Jelf Employee Benefits.
In a survey of almost 200 employers carried out by Jelf and retirement workshops specialist LaterLife Learning, 35 per cent said they would offer all of their older workers greater remuneration flexibility so that they can benefit from the new freedoms, while 15 per cent said they would consider doing so for some employers on a case-by-case basis. Only 6 per cent said they would not offer this option, with 44 per cent undecided, in a poll of 192 employers with between 50 and 2,000 employees.
The new legislation, which is due to come into force in spring 2015, will allow employees over age 55 to access defined contribution retirement funds in any format they desire, allowing employers to redirect salary payments directly into pension savings with both parties avoiding National Insurance (NI) liabilities, and with the employee still having full immediate access to their funds as required.
The research also found that the new pension freedoms are of appeal to older employees. The survey of employees who had recently retired found that 22 per cent would have used the greater access and flexibility regarding pension funds had it been available when they retired, with another 9 per cent still able to utilise this flexibility and a further 30 per cent not sure.
The 2014 Jelf Employee Benefits Survey research also found that 78 per cent of employers haven’t yet made their employees aware of the proposed changes to pensions fund access, although the majority 67 per cent are gearing up to do so. It also found 69 per cent of the sample do not currently offer pre-retirement courses to their staff.
Jelf Employee Benefits head of benefits strategy Steve Herbert says: “Our research shows that the appetite for this remuneration option may well have been grossly underestimated by the legislators. It remains to be seen if the rules will be tightened to avoid this practice becoming widespread, and if so how this can be achieved without damaging the concept of freedom of access to pension funds.”
LaterLife Learning managing director Tony Clack says: “There has never been a time of greater change within pensions legislation. Added to the removal of the default retirement age this increases the complexity of decision-making and consequently the need for greater retirement education to assist with both financial and lifestyle decisions. As a result we are seeing unprecedented demand for our retirement courses, as more and more organisations recognise the necessity to assist their employees in preparing for retirement’.”