Out-Law Analysis | 03 Mar 2016 | 12:45 pm | 1 min. read
Many workers will already have read in the press that some form of upheaval is in the offing, and this is rarely presented as a welcome development. Trustees and employers need to be ready to communicate with a pension scheme membership that is likely to start from a position of scepticism.
Flexible benefits packages
Many employers offer flexible benefit schemes, which allow workers to choose the benefits to which they can allocate a portion of remuneration. If workers misunderstand the implications of their choices, they will at best be dissatisfied when they realise their mistake and at worst sue their employer for misleading them.
It is vital for employers that offer such schemes to ensure their workers are kept informed about any changes to pension taxation, since this may affect their benefit choices.
Explaining the changes
Once any changes are announced, employers and trustees should be ready to explain the following in general terms:
There will be no need to cover the changes in any detail at this stage. Rather, employers and trustees should provide just enough information to give workers a general grasp of the impact of the changes on their pensions so that they understand the issues going forward.
Workers will need to know the facts once the changes have been announced. Communications will need to be sent out quickly, without compromising on clarity, accuracy or readability. Care and planning should start now to get this right. In addition, pensions administration team members will need to be fully briefed to prevent any misunderstandings.
We don't yet know what the changes will be, although informed opinion largely expects some form of flat rate tax relief. If so, the changes are likely to be unwelcome to higher and additional rate taxpayers, but likely to provide a welcome boost to the pension savings of lower-paid workers.
Carolyn Saunders is a pensions law expert at Pinsent Masons, the law firm behind Out-Law.com.