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iPad versus Pension - a fair fight now?

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Back in the early 1970s we had Maggie Thatcher who, as the Education Secretary of the time, was labelled the “Milk Snatcher” when removing free milk for the under 7s, and now we have Philip Hammond the “iPad Nabber” taking away employees’ access to discounted iPads and Galaxy Tabs!

Apologies, I guess you may be wondering what I’m going on about? Well one of the more popular benefits under employer salary sacrifice schemes has been the ability to purchase a nice shiny piece of IT hardware (usually a tablet, Notebook or Desktop) with the added bonus of making Tax and NI savings on the purchase price. However, following the Chancellor’s Autumn Statement he has decided to remove the salary sacrifice (tax and NI savings) benefit of doing so. Other salary sacrifice benefits such as Pensions, Childcare Vouchers and Cycle2Work schemes are to remain protected.

So should the Chancellor be vilified for this decision as much as Maggie was 40 years ago? Well, I guess that may well depend on your love of all things Apple or Samsung, but I think he might have potentially done savers (especially younger ones) a huge favour. They may well not think it now, but ultimately his decision may well be a significant force for good in the future retirement planning of this and the next generation. Please don’t get me wrong, I don’t necessarily think he was considering the likely impact of his decision on employees’ future retirement savings, his focus was certainly more about the impact on the Treasury coffers – ‘twas ever thus. But by removing some of the more “sexier” options available under salary sacrifice, he may well have paved the way for employees to think more with their financial heads and less about their joysticks!

By this, I mean that by clearing away some of the “benefits clutter” available to employees these days, they can concentrate on things which will be of real long term benefit to them ultimately - whether this is done through a healthier lifestyle (Cycle2work) or by upping their pension savings to provide a healthier pension pot at retirement.

Up until the recent Autumn Statement, it had been a pretty one sided fight when you think about retirement savings versus the more glamorous world of iPads and Galaxys. However, now employees may have less of a dilemma when it comes to allocating their net income.

Interestingly the dictionary describes a dilemma (a Greek word - my Greek wife tells me ) as a double proposition, usually between two distinctly unattractive offers – (if only I could think of a recent political event to illustrate this?). However, lets try and imagine an imaginary employee having to make an imaginary choice some time after April 2017 and the dilemma they may face - so let’s play….

 …..EMPLOYEE BENEFITS TOP TRUMPS!

Who said pensions weren’t fun!

toptrump chart

The results are in

So it’s been a tough but fair fight resulting in a 5:5 score draw by my reckoning and that’s not too shabby considering businesses like Apple have something like a $1Billion per annum marketing budget and the DWP have “Workie” to promote pensions.

So, in summary, when you take into account the changes that have been made to pensions in the last 18 months (, complete flexibility at retirement, charge capping) and the benefits which will be taken away in 2017 from salary sacrifice it certainly becomes more of a level playing field.

This presents both an opportunity and a challenge to employers and the pensions industry to step in and fill the savings gap. Those employees who would quite happily have bought a new iPad (or similar) need to be encouraged to think about putting their £50 a month towards their future. Yes it’s not sexy and (at present) there’s no instant gratification or excitement in making these kind of decisions, but ultimately it’s a decision they can’t afford not to make and we should be there to help them make it.

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