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 Hilary Mantel 'should be investigated by police' over Margaret Thatcher assassination story, says Lord Bell
- 2 Rihanna 'nude pictures' claims emerge on 4Chan as hacking scandal continues
- 3 Kim Kardashian 'nude photos' leaked on 4chan weeks after Jennifer Lawrence scandal
- 4 'F*ck it, I quit': KTVA reporter Charlo Greene quits live on air in spectacular fashion
- 5 Hitler’s former food taster reveals the horrors of the Wolf’s Lair
Rihanna 'nude pictures' claims emerge on 4Chan as hacking scandal continues
Kim Kardashian 'nude photos' leaked on 4chan weeks after Jennifer Lawrence scandal
'F*ck it, I quit': KTVA reporter Charlo Greene quits live on air in spectacular fashion
Jennifer Lawrence: Leaked 4Chan sex video branded 'fake' by users
Jennifer Lawrence 'naked sex video' will be leaked next, threatens 4Chan celebrity photo hacker
Scotland could still declare independence – even without referendum, says Alex Salmond
Scottish referendum results: Cross-party consensus collapses amid Tory-Labour spat on the 'English question'
Hilary Mantel 'should be investigated by police' over Margaret Thatcher assassination story, says Lord Bell
Scottish independence: David Cameron is becoming the 'George Bush of Britain'
Plebgate MP Andrew Mitchell called officer a 'little s**t', claim court documents 'exposing ex-Chief Whip's 'record of abusing police'
Archbishop of Canterbury admits doubts about existence of God
iJobs Money & Business
£65000 Per Annum Benefits + bonus: Clearwater People Solutions Ltd: If you are...
£20000 - £25000 per annum + OTE £40,000: SThree: SThree are a global FTSE 250 ...
£20000 - £25000 per annum + OTE £40000: SThree: As a Recruitment Consultant, y...
£20000 - £25000 per annum + OTE £40,000: SThree: SThree Group have been well e...