On Wednesday 19th March, Chancellor of the Exchequer George Osborne revealed his plans for this year’s budget. Amongst the changes announced were several that will have an effect on the compensation, benefits and rewards industry.
Employer childcare support
In 2013 the government revealed plans for a tax-free childcare scheme designed to encourage parents back into work after the birth of a child. Wednesday’s budget confirmed these plans along with the intention to stop childcare vouchers, which currently benefit only half a million families throughout the UK.
Those families on the existing voucher scheme will not have them taken away. However, if the employee should move jobs the scheme will no longer be available to them in their new place of work as of autumn 2015. Instead, eligible families with children under 12 years old will be able to enrol on the tax-free childcare scheme within its first year of operation.
The new scheme will make a significant difference to double the number of families currently on the voucher plan according to the government, as it is not reliant on employer involvement. Chancellor Osborne also confirmed plans to raise the cost cap to £2000.
Defined contribution pensions
Those retiring with defined contribution (DC) pensions will have greater flexibility when accessing their savings. According to Osborne, DC members will be able to take their pension as a lump sum, draw down or an annuity:
- As of 27th March the maximum lump sum a member can take will increase from £18,000 to £30,000, while those who have elected to drawdown their pension will see the amount increased from 120% to 150% of an equivalent annuity.
- If a member has several small pension pots, they are now able to withdraw 100% lump sums from three at a time.
- Members will continue to be able to withdraw a lump sum of 25% of the total value of their pension tax-free, however, as of April 2015 any amount over 25% will be subject to the individual’s marginal tax rate rather than the current rate of 55%.
The changes come as a result of current pension schemes lacking the capacity to deal with the rise in DC members selecting to withdraw their pension gradually, rather than all in one go. This is largely to do with the economic climate; for example the drawdown method allows members to take an income from their pension while the majority remains safely invested.
What does this mean for businesses?
It is important for employers to be aware of legislative changes that will impact employees as well as themselves. Your compensation, benefits and reward professionals will be able to assess how reforms to pension access and childcare will affect relevant individuals within your organisation, and implement any necessary adjustments into your benefit package.
Portfolio CBR can help you find experienced compensation, benefits and rewards candidates for your business. Whether you are looking to implement a flexible benefits scheme or you need a compensation specialist within your HR department, we can find a candidate for your vacancy. To speak to one of our recruitment consultants today, please call us on 020 7650 3190.