A Mason Hayes & Curran (MHC) webinar on employee-benefit packages last week heard that a Central Processing Authority has not yet been set up to enable the planned introduction of an auto-enrolment system for pensions next year.
The authority would oversee the operation of the new system, which would give employees access to a workplace pension-savings scheme co-funded by their employer and the State.
Stephen Gillick (MHC head of pensions) said that he was “very sceptical” that the new system, under which workers would have to ‘opt out’ if they did not want to be enrolled, would be in place by the first quarter of next year, as planned by the Government.
He said that a central authority could take two to three years to be set up, although there was talk of a temporary body being established.
A survey carried out among participants at the event also found that 70% did not think that businesses would be able to have systems and processes in place to meet such a deadline for auto-enrolment.
SSAPs ‘made unworkable’
Andy Dixon of Harvest Financial Services, which advises company directors and executives on pension arrangements, said changes in the sector over the past two years had brought “some significant challenges”.
He said that changes required by the EU’s IORP II directive had made small self-administered pension schemes (SSAPs) unworkable or expensive, and that these were being gradually wound up.
Dixon told the webinar that master trusts and PRSAs (personal retirement savings accounts) would be the main pensions structures for private clients in the future.
Master trusts offer professional boards of trustees, and reduce the regulatory burden on employers.
Dixon said that PRSAs had not been common among executives previously, but changes in the Finance Act 2022 – including loosening of restrictions on contributions – had made them a viable alternative for many.
KEEP take-up low
MHC partner Conall Geraghty spoke about various schemes that could be offered to senior management at firms.
He said that Revenue-approved share schemes were tax-efficient, but not suitable for targeting senior executives. Geraghty described these as “more general saving schemes” that did not provide flexibility.
He said that share options, while they could be “efficient and highly flexible”, could also lead to a potentially higher tax liability.
Geraghty also told the webinar that there were significant barriers to take-up of the KEEP (Key Employee Engagement Programme) scheme targeted as SMEs, which he described as “particularly low”.
He added, however, that the Finance Act had removed some of these barriers.