It seems that the majority of those employees who will be affected by the reducing lifetime and annual allowances from April 2016 will be compensated by cash instead.
This has its problems as what should these individuals do with this cash? As this is effectively being paid in lieu of a pension benefit, then ideally it needs to be invested somewhere safe to enable financial security for retirement. But cash can easily be spent and there are many investment options out there that would be only too happy to receive this extra cash but that are totally unsuitable as long term savings options.
So how will individuals affected by these impending reducing pension tax allowances know where to invest their cash? Financial education and access to advice provide the answer.
From the blog: More than half of schemes are considering offering a cash allowance to members affected by pension tax changes, as alterations to the lifetime allowance threaten to drive high-earners away from workplace pensions. Reductions to the lifetime allowance to £1m from £1.8m combined with proposed changes to the tax treatment of pensions could drive high earners to seek other forms of saving. A survey released this week by consultancy PwC, which received 130 responses from businesses of a range of sizes, showed 51 per cent were in discussion over offering a cash allowance to members affected by tax changes.