January 04 ,2016 | by Claire Payne

Firms change rewards due to UK pension tax changes

UK pension tax changes

A third of companies in the UK are changing the way they reward higher earners due to changes in pension taxation, according to new research from PwC.

New restrictions on the amount UK taxpayers can pay into their pension tax free over a year will take effect from April 2016, significantly altering annual and lifetime allowances for higher earners.

Potential impact

Big four accountancy firm PwC estimated that those earning over £90,000 a year could be affected by the changes, while 26 per cent of the 130 companies it surveyed said they are already reviewing the role of pensions for all employees.

The survey revealed that one likely outcome of the changes is that many companies will close their defined benefit (DB) pension schemes. Of those that have DB schemes, 30 per cent are considering closing future accrual for scheme members and 35 per cent have decided to implement cash allowances.


PwC Head of Defined Contribution Pensions Philip Smith said: "The changes to annual and lifetime pensions allowance is forcing companies to rethink how they reward their higher earners.

"It is clear from our research that pensions are set to play a much smaller role in the reward packages of higher earners in the future. This could have a knock-on effect for all employees, as a significant proportion of decision makers will be disenfranchised from pension saving." 

Claire Payne

Claire Payne is a journalism graduate and News Writer for LSBF. She writes about SMEs, education and careers, entrepreneurship, women in business, and sustainability.

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