Changes to pensions schemes: potential pitfalls for high earners

What should trustees and companies be doing?

The liability for any tax charge introduced by the anti-forestalling legislation falls on individuals.

Therefore the company and trustees will not be liable for a tax charge on an individual's benefits should this be triggered by a scheme change.

But these changes should be considered by employers, HR managers, pension scheme managers and trustees in different scenarios. HR managers may want to consider the impact of the tax changes on making changes to benefits structures, when making promotions or pay rises that take individuals above the £150,000 income threshold or when paying large, one-off sums e.g. bonuses, redundancy payments or settlement amounts under a compromise agreement.

Pension fund managers should consider the impact of the new regime when making changes to schemes, e.g. on scheme mergers, allowing additional contributions or one-off payments or closing schemes to further accrual and putting in place alternative arrangements. If high earners are affected they should be alerted as to the impact this may have. The anti-forestalling regime is complex, and advice should be sought on the specific proposals.

To ignore the issue could result in employees earning in excess of £150,000 being placed in a worse position in relation to their pension because, as a result of a scheme change, their contributions are no longer protected from the special annual allowance tax charge.