Changes to employee perks on the horizon
Many employers now offer their staff great methods of saving, with valuable tax breaks and discounts, such as company pensions, Save As You Earn schemes, share incentive plans, workplace Isas, childcare and salary sacrifice schemes.
However, a number of key changes are due to come in that individuals should be aware of.
The government has announced that it is considering limiting the range of benefits which can be bought using salary sacrifice. This arrangement enables an employee to give up part of their salary in return for non-cash workplace benefits, such as childcare vouchers or increased pension contributions.
Lower cash pay means they pay less tax and national insurance (NI), and employers' NI contributions are also less. Some employers pass on part or all of these savings to their employees.
Childcare is one area where changes have already been announced and will be rolled out from early 2017.
However, parents who are already members of the current childcare voucher system can continue in it, providing their employer will still provide access to it; new members will also have the opportunity to join the current scheme up until April 2018.
The new system, called Tax-Free Childcare, will be available online, and the state will contribute 20p for every 80p that parents spend on childcare.
The maximum state contribution per year will be £2,000 per child (or £4,000 for disabled children). Parents must be in work to qualify, and must earn over £100 per week but no more than £100,000 per year.
Whether you are better off with the old or new scheme depends on how much you earn, how much you spend on qualifying childcare and how old your children are.
It will only be available to parents with children up to the age of 12 (17 if disabled), whereas the current system is available to children up to age 15; so those with older children will lose out.
There will also be no NI saving under the new system, so employed parents with lower childcare costs could be worse off. However, it is available to everyone, which is good news for those who work for companies that don't offer the voucher system and the self-employed.
The government has confirmed that some salary sacrifice benefits won't change, including employer pension contributions, employer-provided pension advice, provision of workplace nurseries, and cycles and cyclists' safety equipment provided under the cycle to work scheme.
It has not been confirmed what else will be hit by the changes, but schemes for life insurance, mobile phones, cars, parking, life insurance and medical insurance could all come under threat.
Any changes could have a massive knock-on effect on all employees, but I fear mid- and lower-paid workers, who rely on the savings generated to afford these benefits, will be hardest hit.
OTHER BENEFITS LIKELY TO BE AFFECTED
The government has been consulting on changes to salary sacrifice and is expected to announce the outcome in this year's Autumn Statement on 23 November. These would then most likely come into play from April 2017.
Another benefit to be affected is access to financial advice. The government has launched a consultation on allowing individuals to take £500 tax free from their defined contribution pension, to redeem against the cost of 'holistic advice' that considers all of an individual's savings; such as pensions, Isas, share schemes and other investments.
According to the proposals, the 'Pensions Advice Allowance' will come into force from April 2017 for individuals below age 55, but the exact age is yet to be agreed.
In addition, from April 2017 the tax and NI relief for employer-arranged pension advice will increase from £150 to £500. It is feasible that in combination these could give individuals access to up to £1,000 of tax-advantaged financial advice.
Having the ability to pay for advice is important, as too many people go it alone and make poorly thought-out decisions.
The benefit in improved retirement income can more than out-weigh this cost, so taking fully regulated advice could save money in the long run whilst also providing added consumer protection.
Company perks are no longer just about pensions. With so many options now available, financial education, guidance and advice are essential to understanding what is available to employees, and what can be achieved through workplace saving.
The workplace holds really valuable benefits and I urge individuals to speak to their employer to find out what benefits they offer, and how these are changing.
Jonathan Watts-Lay is director of WEALTH at work, a leading provider of financial education in the workplace, supported by guidance and advice.