Re-examination of pension tax rules needed, says SPBwritten by Bella Palmer
A potential rise in flexible working may require more flexible pension schemes
Changing work and income patterns resulting from the Covid-19 pandemic call for a re-examination of pension tax rules, Squire Patton Boggs (SPB) has said.
The law firm warned that tax rules need to adapt to changing working habits to ensure that pensions remain “both fit for purpose and an attractive vehicle for long-term savings”.
In an overview exploring the long-term impact the Covid-19 crisis could have on pension saving, SPB partner, Kirsty Bartlett, queried whether pension tax legislation could be adapted to better facilitate partial retirements.
Bartlett also noted that there could be benefits in increasing the permitted time period between a member accessing their initial lump sum and their monthly pension coming into payment.
Furthermore, the potential rise in flexible working could “increase pressure on government and employers to provide more flexible pension schemes”, according to Bartlett.
In its overview, SPB also warned that the increased pressures on defined benefit (DB) pension scheme funding arising from the pandemic could put a strain on trustee-employer relationships.
Differing expectations of The Pensions Regulator (TPR) and the sponsoring employer was highlighted as a key issue, especially if the employer is owned by an overseas parent company that is unfamiliar with the regulator framework applicable to UK DB schemes.
Additionally, SPB noted that disagreements “commonly arise” where employers are reluctant supply confidential financial data to trustees.
To avoid a breakdown in relationships, SPB suggested that transparency is balanced with commercial sensitivity by establishing information-sharing protocols, confidentiality undertakings and robust trustee conflicts of interest policies.
These documents are sometimes only considered when there is already a strained relationship, or when a specific need arises, such as a potential corporate takeover, stated Bartlett.
Bartlett said, however, there may be merit in agreeing ongoing information-sharing arrangements, to reinforce a culture of openness and trust, so that expectations can be managed and to enable prompt sharing of information in time-critical situations.
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