Fraser Smart, Managing Director of Buck Consultants, has responded to the 2011 Budget by suggesting Chancellor Osborne has left many unanswered questions including the future of pension schemes, ‘avoidance measures’ and uncertainty about the National Insurance/income tax merger.
“The Chancellor appears to have concluded that pension savers have enough upheaval to contemplate already next month, with Budget 2011 providing no radical or surprise changes for the UK pensions industry. However, questions remain for employers over the future of several pension schemes, as little detail was handed out on plans for ‘avoidance measures’ and uncertainty remains over the touted National Insurance/income tax merger.
“Much of the anticipation ahead of Budget 2011 centred around the possible merger of NI and PAYE, for which the Chancellor has now announced plans for a long term consultation. Many pension policyholders will have breathed a sigh of relief at Osbourne’s pledge to safeguard them from extra tax as a result of this and his intent to maintain the contributory principle. However, there remain major questions on how this will be possible from such a merger.
“This legislation would be a minefield for taxation and structure of company pension schemes, and employers will be particularly fearful for the future of salary sacrifice. However, one positive trait of this coalition government is that it seems willing to take the time to consider the consequences of measures such as this, so employers will welcome a lengthy period of consultation on this issue.
“Another notable feature to arise today is the Chancellor’s pledge to “ask the most from those who can afford the most”. In regards to pensions at least, this does not appear to extend to MPS. He previously promised to move MPs from final salary benefits to money purchase arrangements. Today he announced that he would be moving towards a career average pension for MPs, which suggests they will not be tightening their belts in retirement as much as the average voter.”