AWD Chase de Vere urges caution over the use of Employer Financed Retirement Benefit Schemes (EFRBS).
With so much uncertainty hanging over the future of EFRBS we have serious concerns that they are being actively recommended to corporate clients and high earners, when in a few months they may no longer be appropriate.
Since the pension anti-forestalling rules were introduced in the 2009 Budget employee benefits advisers have been heavily promoting EFRBS as an attractive alternative to registered pension schemes. Whilst EFRBS have some attractive features they also have some drawbacks that may come back to bite.
EFRBS can appear attractive, in that they avoid any special annual allowance tax charge, employees are not subject to tax or national insurance on employer contributions, they can be structured to allow gross roll up of funds, no annual or lifetime allowance restrictions apply and potential inheritance tax advantages can be gained.
However, the Government has announced that it is currently reviewing trust arrangements used to remunerate high earners, including EFRBS. There is a real fear that genuine employee benefits arrangements will be penalised in this review.
Potential changes to the proposed rules for restricting higher rate tax relief on pension savings for high earners (as alluded to by George Osborne in his emergency Budget speech) could also reduce the suitability of EFRBS for many employees.
AWD Chase de Vere is speaking with corporate clients about EFRBS and considering them as a potential option for high earners. However, we are very sceptical about any implementation until their future position is clearer.