I was in a meeting for the duration of yesterday, so did not have a chance to hear the statement live. I have therefore been cobbling together my understanding of the key points from News-Wires and the like (always an imprecise art) this morning, and will obviously add any additional items if/ when identified.

So what did The Chancellor tell us that impacts on employee benefits?

Well, for the moment, all the headlines appear to be pensions related. This is not surprising, as some of the biggest tax breaks in the system still apply to UK pensions. And given that no one, not even Osborne himself, can currently pretend that the economy is heading in the right direction, pensions are squarely in the firing line for reduced incentives.

The four points that I think are of relevance to many UK employers on the pension front are as follows:

1) Reduced Annual Allowance

The Annual Allowance (AA), the amount an individual can contribute to a UK pension and receive tax incentives in any one year, has been reduced from £50,000 to £40,000 in the 2014/15 tax year. Clearly this change is only likely to impact high earners, but it is something that employers should be aware of if you have individual, senior, employees who are currently contributing large sums to their pension plans.

It’s worth noting that the AA was standing at £255,000 in only 2010, so these are sustained and significant reductions. Coupled with…

2) Reduced Lifetime Allowance

This has also been reduced significantly. The Lifetime Allowance, broadly the amount of pension savings that can be accumulated over an employees lifetime and benefit from tax incentives, has dropped from £1.5m to £1.25m (again in 2014/15).

Again, if you have high earners/ savers, or those with significant past benefits from a Defined Benefit scheme, this could be an issue.

The combined tax saving to the treasury of the above two measures is estimated to be c. £1bn, so given current economic constraints, and only a finite loss of votes given that these measured are targeted at relatively few high earners, it’s perhaps understandable why The Chancellor has chosen to target these specific areas at this time.

3) A Personalised Protection Regime

Have not seen much on this yet, but one of the news-items I read included the following quote:

The Government is also considering introducing a “personalised protection regime”, in addition to a new fixed protection, for people who think they will be affected by the lifetime allowance cut.*

It is difficult to avoid the conclusion that this is a ‘sop’ to the better-heeled Tory voters who might be disadvantaged by the above changes. And this is likely to add even more complexity to pension planning, something I am sure will bring a collective groan from employers. Obviously, will supply more details when these become known here.

and finally…

4) The Flat Rate State Pension

After a recent ‘wobble’ in policy commitment here from David Cameron in September, it looks like this is back on the cards once more. This is good news, and (unlike point 3 above) will help simplify pension planning.

Best regards

Steve

*money marketing 05/12/12