UK Pension Cap Leaves FTSE Company Directors Facing Higher Tax Bills

by Robert Lee, Tax-News.com, London

07 February 2005

A report released last week by consulting firm Deloitte calculated that almost half of FTSE100 directors will face a 55% tax on their retirement savings under the government’s new pension cap.

According to the report, 41% of directors at firms listed in the FTSE 100 will find themselves over the £1.5 million pension tax relief threshold to be introduced next April as part of the new Finance Act, after which contributions will be taxed at an effective rate of 55%.

Deloitte also predicts that the changes will affect 23% of the directors serving with FTSE 250-listed firms and the directors affected are those who joined their companies’ final salary schemes before 1989, leaving them without an annual cap on contributions.

Bill Cohen, employment solutions partner at Deloitte, revealed that the firm has been approached by a number of clients who were seeking ways in which the tax could be mitigated, although he expects the cap to result in a switch to less generous pension provision and more performance-based remuneration packages for directors.

“The remuneration committees understand loud and clear that they cannot make the problem go away by throwing more money at directors,” explained Mr Cohen.

Recommended