Executives could find that the cap doesn't fit
Thursday 05 January 1995
But this may expose them to large future liabilities, which - once they become material - will have to be provided for in the company's report and accounts.
David Atkins, of Monks Partnership, editor of the report, Top Level Pension Practice, said: "From company comments, it is apparent that some have not explored all the possible alternatives before deciding on their policy towards the earnings cap. It is also questionable whether some of the currently evolved policies will be acceptable or sustainable as the number of capped executives and other high-earning employees increases."
For the moment, though, few companies outside the financial sector have more than 10 capped employees. Even in the financial sector, nearly half of companies make no special provisions for earnings-capped executives and more than half make no provisions for life assurance above the cap.
The pensions earnings cap was introduced in the 1989 Finance Act and limited the pensionable earnings that could be used for the calculation of benefits under an approved pension scheme. The idea is that high earners should not be excessively subsidised by less well-paid taxpayers. However, the cap does not apply to those who joined before June 1989.
When introduced, the level was £60,000. But increases in line with the rise in the retail prices index have raised it to the present £76,800. Following the announcement in last November's Budget, it will rise further, to £78,600 from 6 April.
Besides limiting contributions, the cap restricts benefits. For a typical final salary plan, the maximum pension is limited to two-thirds of the earnings cap, a maximum of £52,400 from April. However, executives can also put aside money for their retirement through unapproved schemes, such as those based in offshore tax havens or straightforward savings plans, which would, of course, be subject to normal taxation.
- 1 The truth about 'girl things': Three cheers for Heather Watson's honesty
- 2 Man who held up 'hire me' sign at Waterloo station returns a year later with 'I'm hiring' sign
- 4 Tennis fan suing Australian Open organisers for 'failing to shade spectators' during Murray match
- 5 Syrian refugee child beaten by Istanbul Burger King manager for eating customer’s leftover food
Man who held up 'hire me' sign at Waterloo station returns a year later with 'I'm hiring' sign
Saudi preacher who 'raped and tortured' his five -year-old daughter to death is released after paying 'blood money'
Rob Lowe hits out at White House decision not to meet Israeli leader
Iraq invasion 2003: The bloody warnings six wise men gave to Tony Blair as he prepared to launch poorly planned campaign
Winston Churchill: From accusations of anti-Semitism to the blunt refusal that led to the deaths of millions
British Muslim leaders outraged after Eric Pickles says followers of Islam should 'prove their identity'
UK terror fears: My jihadist son returned from Syria mentally scarred – now he is being ignored
Nigel Farage: NHS might have to be replaced by private health insurance
Billy Crystal: 'Stop shoving gay sex scenes in my face'
'We would evict Queen from Buckingham Palace and allocate her council house,' say Greens
French court convicts three over homophobic tweets, in case hailed as a 'significant victory' by LGBT rights campaigners
iJobs Money & Business
Negotiable: Recruitment Genius: A Tax Assistant is required to join a leading ...
£16000 - £25000 per annum: Recruitment Genius: This is an exciting opportunity...
£45000 - £47000 per annum + bonus + benefits: Ashdown Group: Java Developer / ...
£35000 - £38000 per annum + Benefits: Ashdown Group: Marketing Manager - Marke...