Pensions are starting to converge with flexible benefits packages. Will this help or hinder take-up?
In terms of technology, corporate platform offerings are still very much in their infancy. "The companies that have offered flexible benefits systems in the past are not those that are now offering financial corporate platforms," says Jonathan Watts-Lay, director of platform provider WEALTH at work. "Merging the two is happening, but there is still a long way to go."
One of the main problems hindering some corporate platforms is a lack of true integration
between financial vehicles. "If you can't transfer share incentives directly into the pension, for
example, then where is the value?" asks
Watts-Lay. Cashing in a sharesave scheme will incur taxation – even if the cash is
then re-invested into the pension, whereas rolling it over directly into a pension will not suffer
the same charges.
Watts-Lay explains: "If an employee takes childcare benefits in the first instance, there is a tax saving. If the employee wanted to use that tax saving proactively, then the money could be invested into a company sharesave plan. At the end of the five-year period for that plan, the share value could be rolled over into the pension plan." Watts-Lay says that making best use of tax efficiencies over time in this way is an effective way of getting the most from a flexible benefits system and the employee's pension is the ultimate beneficiary.
This could also ease the burden of pensions auto-enrolment. "When auto-enrolment comes into
play, employees may feel that they can offset the effects of having to make the contributions by
using other tax-efficient benefits such as childcare vouchers to mitigate the cost."
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