An interesting article appeared in the broadsheets over the weekend – essentially higlighting the fact that whilst there is widespread press speculation as to what might happen with CGT rates later this month, there could be further pain on the way over the term of the current Parliament as far as penisons are concerned.
The Lib Dems, who seem to be having an unhealthy input into the tax policy of this new Coalition Government, slipped into their Manifesto that they would restrict pension tax relief down to the basic rate of 20% in order to fund their proposed increase in the income tax allowance to £10,000.
The Conservatives on the other hand have indicated that they intend to continue with the policy created by Labour and restrict relief for those earning £130,000 or more.
Bearing in mind the Coalition Government have stated they will indeed adopt to Lib Dem proposal to increase the income tax personal allowance to £10,000 (from an unspecified date) it will be interesting to see how this “tension” is squared off – particularly as the new Coalition Agreement issued on 12th May 2010 gave no clues.
Perhaps now may the time to look at alternative pension strategies such as EFRBS (Employer Funded Retirement Benefit Schemes)?
These are increasingly coming to the forefront as genuine, flexible vehicles through which employers can provide pension benefits to their key employees – either to run alongside existing “approved” schemes, which are already overfunded (or where the employee is subject to the earnings cap) or to operate in isolation where an approved scheme is perhaps not the best way forward.
HMRC have of course recently highlighted EFRBS in Spolight 6 indicating they will litigate where companies claim a Corporation Tax deduction for employer contributions to an EFRBS scheme before any benefits are actually paid by the scheme to the employee, however providing care is exercised on the way EFRBS are structured they are genuinely a powerful tax planning opportunity.