Hewitt calls for delay to UK pension tax reform
UK – Hewitt Bacon & Woodrow has called for the planned implementation of UK pension taxation reform to be put back a year.
“The government needs to end this uncertainty and to give schemes until April 2006 (rather than 2005) to make the changes,” said the firm’s Geraldine Brassett.
“The Inland Revenue's proposed reforms to pension taxation are bold but necessary, and the government should quickly dispel current uncertainty by confirming that the changes will go ahead,” Hewitt said in a release.
It added that the Department of Work & Pensions “also needs to take steps on simplification and that the pensions industry requires more time to deal with all this change”.
The comments accompany Hewitt’s formal response to the Inland Revenue consultation. "We have told the Revenue that we are enthusiastic about the changes, and that surveys of our clients show the majority (around 80%) want them to proceed,” said Brassett.
"However, the industry needs to be able to prepare for such a radical overhaul of the pensions taxation system, and cannot do this properly given the current uncertainty about specific details and whether the changes will proceed at all.
She added: "Unintended consequences have been a feature of UK pensions legislation. We remain concerned that many senior decision-makers will no longer have an incentive to ensure that employees are provided with good pension arrangements.
Hewitt said that while the Inland Revenue had made “great efforts” to simplify pensions, the Department of Work and Pensions “still seems reluctant to follow this lead”.
The firm said this month’s new Pensions Bill “added further regulation without any meaningful measures to make pensions simpler for employers to run, or clearer for members to understand”.
Meanwhile, Watson Wyatt has released analysis which found that the response to early-retirement incentives “was so weak that it could take an uplift in state pension benefits of about 33% for each year of delayed retirement in order to raise the average retirement age by one year”.