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16 Oct 2015
by Debi O'Donovan

3 key employee benefits at risk of government attack

There are three key employee benefits areas that many in the industry (across providers, advisers and employers) expect will be under attack from the current government.1. Salary sacrifice:For some time now we have been aware that Whitehall civil servants are looking closely at tax on benefits. The fear is that, due to the need to cut government expenditure and to sweep away tax complexities, we could lose some/many/all salary sacrifice benefits.The voices putting forward the bigger picture view are small. The voices putting forward the simplification view are loud.Hence REBA launching a lobbying group last week.Just imagine if you couldn't fund your reward schemes via salary sacrifice? What would it cost then?2. Pensions:Poor old occupational pensions. They have taken a battering for decades now. And employers seem to be the whipping boy each time, while employees continue to lose trust. I hear widely varying views on the likelihood of changes to pensions taxation. From ‘it will get buried in the long grass’ through to ‘if they take away the tax breaks on contributions, employers will lose all incentives to bother with pensions’.A common cry is: stop fiddling with pensions (not least because of the confusion it causes and the ongoing costs to updating payroll, policy documents etc, etc).Then you hear the horror stories about freedoms, LTA and so on, and are tempted to think: a small tweak here or there is vital….3. Health Insurances:There are a few (I know of at least two, so there must be more) lobby groups springing up to put their case to government in the face of the rise in insurance premium tax (IPT) next April. The fear is that if IPT is too high both employers and employees will walk away from it due to the cost, and decide to rely more on the NHS.Of course, those who make their living out of selling health insurance will object. But it is worth thinking through the implications for workplace wellbeing.My viewSalary sacrifice is there to promote broader societal needs, not to save tax (the tax saving is simply a mechanism to deliver the societal needs).I believe people should be given equal tax breaks, but I reluctantly accept that the business leaders who decide on pensions might not make decisions in the best interests of their staff if said leaders aren’t getting good tax breaks themselves. On health and wellbeing, I believe employers need greater (not fewer) incentives to promote wellbeing in the workplace. Perhaps the IPT isn't the solution, but let's find a solution before damaging what we already have got.

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There are three key employee benefits areas that many in the industry (across providers, advisers and employers) expect will be under attack from the current government.

1. Salary sacrifice:
For some time now we have been aware that Whitehall civil servants are looking closely at tax on benefits. The fear is that, due to the need to cut government expenditure and to sweep away tax complexities, we could lose some/many/all salary sacrifice benefits.
The voices putting forward the bigger picture view are small. The voices putting forward the simplification view are loud.
Hence REBA launching a lobbying group last week.
Just imagine if you couldn't fund your reward schemes via salary sacrifice? What would it cost then?

2. Pensions:
Poor old occupational pensions. They have taken a battering for decades now. And employers seem to be the whipping boy each time, while employees continue to lose trust. I hear widely varying views on the likelihood of changes to pensions taxation. From ‘it will get buried in the long grass’ through to ‘if they take away the tax breaks on contributions, employers will lose all incentives to bother with pensions’.
A common cry is: stop fiddling with pensions (not least because of the confusion it causes and the ongoing costs to updating payroll, policy documents etc, etc).
Then you hear the horror stories about freedoms, LTA and so on, and are tempted to think: a small tweak here or there is vital….

3. Health Insurances:
There are a few (I know of at least two, so there must be more) lobby groups springing up to put their case to government in the face of the rise in insurance premium tax (IPT) next April. The fear is that if IPT is too high both employers and employees will walk away from it due to the cost, and decide to rely more on the NHS.
Of course, those who make their living out of selling health insurance will object. But it is worth thinking through the implications for workplace wellbeing.

My view
Salary sacrifice is there to promote broader societal needs, not to save tax (the tax saving is simply a mechanism to deliver the societal needs).
I believe people should be given equal tax breaks, but I reluctantly accept that the business leaders who decide on pensions might not make decisions in the best interests of their staff if said leaders aren’t getting good tax breaks themselves.
On health and wellbeing, I believe employers need greater (not fewer) incentives to promote wellbeing in the workplace. Perhaps the IPT isn't the solution, but let's find a solution before damaging what we already have got.

Debi O'Donovan
Founder
Reward & Employee Benefits Association (REBA)

Twitter: @debiodonovan @REBA_global

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