JLT Benefit Solutions outlines its wish list for the emergency budget

JLT Benefit Solutions calls for rethink on Pensions Tax Relief, freeze on CGT and major Gilt Issuance in emergency budget

 

21st June 2010, London: Ahead of June 22nd, JLT Benefit Solutions outlines its wish list for the emergency budget:

1. Re-think the rules on pensions tax relief and consider the introduction of "hybrid" savings vehicles

The proposed rules to pensions tax relief for higher earners should be completely rethought. As they currently stand, the proposed rules are unfair and would result in an exodus of final salary and other defined benefit schemes. If high earners become distanced from their employer's final salary scheme through unfavourable tax conditions, the likelihood that the employer will cease the provision of final salary benefits is significantly increased.

We recommend exploring options involving combining the pensions and ISA rules to create a hybrid savings vehicle which allows early access to pensions. This should help encourage a much needed savings culture.

2. Leave CGT at 18%

Although CGT rises are inevitable, we are not in favour widespread changes to this tax regime.

With marginal income tax rates now at 50%, one of the few tax measures in place in the UK that actively encourages individuals to remain in this country - including some of our best entrepreneurs - is our low CGT rate. Any increase won't do much to raise significant additional tax revenue, and will instead serve only to increase ‘brain drain' away from Britain towards more favourable regimes.

3. Don't punish basic rate taxpayers by taxing pension scheme retirement lump sums

It is vital that this budget does not penalise basic rate tax payers. Key to this would be the commitment that pension scheme retirement lump sums remain tax-free.

4. ‘Come clean' on NEST and outline timeline by the Autumn

Auto-enrolment, as currently planned, cannot be implemented successfully without NEST or a viable equivalent. Auto-enrolment, time and again, has been proven to increase pension scheme participation rates.

The pensions industry and employers generally are still in the dark about the plans for NEST. We seek a clear steer from the Government on the future of NEST and clarification on the timeline for roll-out of the proposed employer-duties by Autumn at the latest. Leaving it later than this will lead to further uncertainty and UK employers and employees are put at greater risk of being hugely underprepared for changes in 2012.

5. Strongly consider issuing more long dated gilts, in particular index-linked gilts

We reiterate our call for a substantial long dated gilts issue. Extreme supply demand imbalances exist in both the long-dated conventional and index-linked gilt markets as pension schemes and other institutional investors such as insurance companies aim to match their long term liabilities with government debt.

This imbalance manifests itself particularly in the index-linked gilt markets where pension schemes have sought inflation protection at almost any cost. Now is the time for the government to consider addressing this imbalance whilst issuing debt on a relatively cheap basis.

--ENDS--

 

Enquiries:

Jardine Lloyd Thompson Group plc

Paul Dransfield

Tel: 020 7528 4933

EMAIL

 

JLT Benefit Solutions

Simon Hazeldine

Tel: 01727 775 102

EMAIL

 

Editor's Notes:

About Jardine Lloyd Thompson Group plc

Jardine Lloyd Thompson Group plc (JLT) is an international group of Risk Specialists and Employee Benefits Consultants and one of the largest companies of its type in the world. JLT offers a distinctive choice to clients and partners through our combination of independence, scale and specialism.

Jardine Lloyd Thompson Group plc is quoted on the London Stock Exchange and employs 6,000 people worldwide and through JLT NetworkTM provides services in more than 120 countries.

www.jltgroup.com