Executives choose early retirement over pension tax
UK - The UK government’s decision to impose a cap on people’s pension pot has sparked the first public early retirement plan and warnings of a talent drain of senior executives.
David Henshaw has announced he will retire from his £180,000 per year post as chief executive of Liverpool City Council by next March. According to the Liverpool Daily Post, the decision came as bankbench councilors decided against providing alternative forms of compensations, such as paying more in pension contributions now into his fund or giving him a higher salary, which could have meant paying an extra £200,000.
Sir David, 55, told the Daily Post: "The position is no different for me. My intention is to go at the end of March next year.
"No-one has made me any offers or talked to me about any offers. I have made it very clear I am going. I spoke to the leader of the council last year and indicated that I would like to stay, but I had a problem in terms of my pension. That has not changed.”
From April 2006 (A-day) the Inland Revenue can tax pension pots that rise in value above £1.5m, although this amount is to increase each year to £1.8m.
The National Association of Pension Funds, the UK trade body, said this was the first such public decision by a high-profile executive to retire early rather than pay this tax.
The NAPF spokesman said it had argued against the “political gesturing” by the Treasury to impose this cap.
Jonathan Camfield, partner at actuarial consultants Lane Clark & Peacock, said: “As A-day approaches we are aware of a number of executives bringing forwards their retirement plan to avoid this tax. It will cause some talent drain.”
Lane Clark & Peacock in conjunction with communication firm Anthony Hodges Consulting has on Thursday unveiled its software that allows executives to understand if they will hit the £1.5m cap.
Six major pension schemes have already bought the PensionMentor. The six schemes are USS, Cable & Wireless, Diageo, DMGT, Hunting PLC and Pensions Management (Railways Pension Scheme).
PensionMentor is designed to be used without an adviser present and will be available on CD with video explanations.