Most firms are not prepared for the Inland Revenue’s simplification of the pensions tax regime, according to a new report.
Are you ready for simplification?, a report by HR firm Hewitt, showed that of the 170 firms surveyed, 80 per cent are currently not ready for the changes, which are due to come into effect in April 2006.
The Government changes would see the replacement of the current eight tax regimes with a single, simpler system.
Geraldine Brassett, pensions administration specialist at Hewitt, said: “These results point to a huge under-estimation of the need to prepare to meet the requirements of pension simplification.
“It is vital that business acts now, not only to avoid potential financial penalties and negative employer/employee relations, but also to ensure enough time for new scheme design implementation.”
Firms are tackling the implications on their pension schemes differently. The common changes are:
65 per cent are proposing to change their scheme rules to allow members to take a quarter of their benefits as tax-free cash
More than 50 per cent are expecting to implement a form of flexible retirement offer
47 per cent are planning to introduce scheme specific earning caps
32 per cent intend to implement changes to death benefits.