TaxJun 25 2018

National adviser lobbies pension minister on advice tax

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National adviser lobbies pension minister on advice tax

National advice firm LEBC is suggesting the government should extend the tax exemption for employer arranged-pension advice to self-employed workers, and revive the annual allowance ‘carry back’.

In an open letter to pensions and financial inclusion minister Guy Opperman, LEBC makes two suggestions in response to the minister’s “recent call for suggestions to help improve retirement provision for the self- employed”.

Currently, only 16 per cent of self-employed workers are saving into a pension through auto-enrolment.

The government and regulator have been criticised for failing to come up with a joint approach to reforming the pension system for these group of workers.

The first proposal is for the government to extend the tax exemption for employer arranged-pension advice to this group.

This tax exemption – which was extended from £150 to £500 in 2017’s budget – is available for employees through a salary sacrifice arrangement, and also includes instances where an employer reimburses a worker for pensions advice they have arranged.

According to Jack McVitie, chief executive at LEBC, “lack of financial security is a key concern of many self-employed, around retirement planning, making provision for ill health and protecting dependants on death”.

He said: “Employees have benefited greatly from auto-enrolment and enjoy employer sponsored healthcare, sick pay and life cover.

“The self-employed not only have to fund these themselves but also source advice on a suitable package of measures to provide them and their families with financial security.”

LEBC is also suggesting the government to revive the annual allowance ‘carry back’, which was abolished in 2006.

Until then, taxpayers had the facility to pay pension contributions in the current tax year but had this offset against the previous year’s earnings or profits.

Mr McVitie said: “This ‘carry back’ rule was particularly helpful to those who have fluctuating earnings and are not confident of their final figures until after the tax year end.

“Without it many self-employed and others with variable earnings find it difficult to budget for regular payments into pensions with confidence.

“Restoration of carry back would we believe greatly assist the self-employed and other gig economy workers.”

McVitie concluded: “We realise that these measures would require the co-operation of the Treasury, but [we] see them as modest steps in line with the government’s stated aim of promoting better financial security in the self-employed and gig economy sector.”