Exclusive – Corporate advisers predict £2bn-plus tax loss through pension loophole

HMRC will lose more than £2bn in 2015/16 through over-55s flushing salary through pension, and more than half of advisers expect their clients to facilitate it, according to a poll of delegates at the Corporate Adviser Summit 2014.

A poll of 39 senior pensions consultants and advisers at the event asked what proportion of the £20bn or so of the NI and income tax that can be avoided by over-55s flushing cash through pension rather than salary in 2015/16 would actually be avoided. Just a third predicted the figure would be between 0 and 10 per cent, while 44 per cent predicted between 10 and 30 per cent of the available relief would be taken up. A 20 per cent take-up rate would see £4bn stripped from the Treasury’s coffers. None of the group, made up of senior DC professionals, thought the relief loophole would go untouched.

Delegates at the event were divided as to whether trust-based or contract-based pensions offered better outcomes, while 61 per cent thought at least a tenth of occupational DC schemes were struggling to meet the charge cap deadline of April 2015.

More than half – 57 per cent – thought that at least a tenth of employers already staged would switch provider within the next two years.

The view from the conference room

Assuming £20bn or so of the NI and income tax that can be avoided by over-55s flushing cash through pension rather than salary in 2015/16, what proportion of that figure will be avoided?

  1. None                              0%
  2. 0-10%                          32%           
  3. 10-20%                        26%
  4. 20-30%                        18%
  5. 30-40%                        11%
  6. 40-50%                         3%
  7. More than 50%              3%

Do you expect any of your employer clients to flush more over-55s pay through pension rather than salary as a result of the freedom and choice in pensions changes?

  1. Yes          53%                        
  2. No            47%                        

Which regulatory structure is most likely to ensure the best outcomes for non-advised retirees as they pass from the accumulation to the retirement phase?

  1. Trust-based                 46%
  2. Contract-based            54%           

Which of these forms of governance arrangement do you predict will achieve the best outcomes for members?

  1. Master trust                                              18%
  2. Own-trust                                                  36%
  3. Independent governance committee            46%           

What percentage of trust-based DC schemes do you think are struggling to meet the 0.75 per cent charge cap?

  1. None                            5%
  2. 0 – 10%                      34%           
  3. 10-25%                       21%
  4. 25-50%                       26%
  5. More than 50%            14%

What percentage of the staged AE schemes that you oversee do you predict will change provider in the next two years?

  1. None                            8%
  2. 0-10%                         35%
  3. 10-25%                       43%
  4. 25-50%                       11%
  5. More than 50%            3%