Forty-four per cent of employers have seen high-earning employees leave their firms' pension schemes due to the current restrictions in tax relief in 2019, the Association of Consulting Actuaries (ACA) has revealed.

In its annual Pension Trends Survey, the ACA highlighted that this trend has subsequently seen senior decision-makers lose personal interest in this key element of the employee package.

The group stated that there was "an urgent need now for significant simplification" of the pensions tax structure, urging the government to "think carefully on how any further pension tax reforms should be progressed."

The report said: "We strongly urge that any measures are for the long term, properly thought through, involving widespread consultations, so that best endeavours are made to smooth out the problems which have resulted from numerous tweaks made in the regime in recent years".

Issues around the current pensions tax structure have drawn attention after causing problems for NHS staff members, which saw some doctors cutting back hours and retiring early to avoid unexpected tax bills.

The ACA survey supported this, with 21 per cent of employers reporting that skilled staff are retiring earlier or working fewer hours.

The survey also revealed that 75 per cent of respondents consider the current tax structure too complicated.

A government review of the tapered and annual allowance was confirmed as underway last week, while the Treasury has reportedly also outlined proposals to raise the threshold for the tapered annual allowance.

However, 69 per cent of those surveyed thought that the Tapered Annual Allowance should be abolished completely, even if this required a reduction in the general annual allowance.

Industry experts have described the Treasury’s reported proposals as a ‘sticking plaster’, with both the British Medical Association and the Office for Tax Simplification also recommending the removal of the taper.

The research also found that 67 per cent of employers thought that reform should focus more help on lower income groups, even if some other people were subsequently worse off as a result.

Commenting on the findings, ACA chair, Jenny Condron, said: “Pension taxation reform involving greater simplification, to coin a phrase, cannot be for the few, not the many.

"The survey findings support a thoughtful and collaborative review of the regime, even if some knee-jerk action for NHS clinicians is made, given the clear evidence that, for example, the tapered annual allowance is all but inoperable.

“Social care too requires a range of innovative approaches to fund for the longer-term, not just a short-term sticking plaster from the taxpayer.”

This also follows a recent freedom of information reply obtained by Royal London, which revealed that 1,004 people had failed to report that a pension tax charge had been paid by their scheme on their behalf on their tax return in 2016/17, with the firm attributing this under-reporting to the “complexity of the tax relief system”.

Share Story: