Firms urged to act on pension tax changes

UK companies have been urged to prepare for forthcoming changes to the pension tax system.

As from April 2011, the annual pension savings allowance will be between £30,000 and £45,000, with contributions over the threshold being subject to a 40 per cent tax rate.

It is thought that the new legislation - which will directly affect many high-earners - will raise some £3.5 billion for the government.

However, there is concern that many employers are running out of time to make the necessary adjustments to their schemes, with 85 per cent of attendees at a recent Hewitt conference saying they would like the government to delay the implementation.

Tony Baily, principal consultant at Hewitt Associates, welcomed the government's decision to simplify the tax system, but warned that companies can not afford to wait for further details.

"We don’t expect the government to delay implementation as it still needs to raise £3.5 billion each year from pension tax changes," he said.

"Next April will come around very quickly, so companies must take steps now to understand the potential outcomes and how they will need to restructure their benefits to offer best value for their employees."