United Kingdom

GE2015 pensions and EBs impact

May 2015

 

Following a surprise majority win for the Conservatives after opinion polls failed to accurately predict the outcome of the 2015 general election, what impact will the new government’s policies have on workplace pensions and benefits?

Tax
According to Workplace Savings & Benefits, the Conservatives are set to permanently establish the Office of Tax Simplification (OTS) which aims to identify areas in the tax system for businesses and employees which can be simplified and made more transparent. The OTS already carried out a major employee benefits and expenses review, looking at taxable benefits, accommodation benefits and expenses.

Matt Duffy, Head of Online Consulting at Aon Employee Benefits is keen to see how the permanent establishment of the OTS will play in the employee benefits space.

“Progress has already been made with simplifying and rationalising some benefits, including the removal of Benefit in Kind for trivial benefits (under £50) from April 2015”, he said. “There is also a strong wish from employers to extend the tax efficiencies on Health & Wellbeing offerings from just preventative measures to those which cover employees when treatment is required. We will watch to see how this features on the agenda, as well as previous intentions signalled around the aligning of tax and national insurance.”

Pay and reward
The Conservatives have pledged to do more to ensure greater transparency for gender pay reporting with the ultimate aim of reducing the gender pay gap further.

In terms of the National Minimum Wage and Living Wage, the Conservatives said they ‘strongly supported’ a real-term increase in the National Minimum Wage and would urge businesses to pay the Living Wage if they were able to do so. However, Workplace Savings & Benefits reports that they ‘stopped short’ of pledging an £8 minimum wage by 2020 although they promised to ‘take steps’ to tackle non-payment of Minimum Wage, abuses of exclusivity clauses in zero-hours contracts and migrant worker exploitation.

Childcare
The Conservatives have promised to provide 30 hours of free childcare to working families with children of three to four-year olds, in addition to their incoming £2,000 childcare tax relief reform.

Employment rights
Under new proposals, there will be stricter rules for strike action for those in the health, education, fire and transport sectors. 50 per cent of the entire workforce must vote in the strike ballot.

Absence management
Further plans to support those on long-term sick leave back into work will be reviewed, whilst state benefit sanctions will be implemented if medical treatment is refused.

Paid volunteer leave
Employees will be entitled to claim three days paid volunteer leave which is predicted to cost businesses around £2.34bn a year.

Pensions
The defeat of Pensions Minister Steve Webb and Shadow Pensions Minister Gregg McClymount could also be significant, although Tom McPhail, head of pensions at Hargreaves Lansdown told the Independent back in April that it was ‘unlikely’ there would be any further changes to the pension reforms under a Conservative government.

However, Nick Ayton, Managing Director of pension provider GenLife warned that the loss of key members of the coalition who were instrumental in delivering pension reforms will ‘slow momentum’ for changes that will help solve the pensions crisis.

Clare Abrahams, Head of Auto Enrolment at Aon Employee Benefits suggested that the change in personnel might give the industry an opportunity to catch their breath after a significant number of changes in only a few years, although it was likely that Ros Altman, the new Pensions Minister would be able to ‘hit the ground running’. Ros Altman is a pensions specialist, who was previously the government’s Older Workers Business Champion.

Abrahams acknowledged that the industry would be waiting to see how the proposals such as reducing tax relief to high earners would be implemented.

“At some point, they will also have to address the fact that certain policies are conflicting,” she added. “Auto enrolment legislation is aimed at people saving sensibly and having less reliance on the state, but the new pension freedoms could be detrimental to this if they are abused. We also would not want to see tax or National Insurance relief on pensions being reduced any further – especially to such a state that they then won’t encourage reasonable levels of savings in the first place.”

 

 

Aon UK Limited is authorised and regulated by the Financial Conduct Authority. Registered in England and Wales. Registered number: 00210725. Registered Office: The Aon Centre, The Leadenhall Building, 122 Leadenhall Street, London EC3V 4AN.