Employers need to review their pension arrangements for new senior executives in relation to the Lifetime Allowance, according to Watson Wyatt.

The Lifetime Allowance, introduced in April last year, currently allows people to invest up to the equivalent of £1.5m into their pension over a lifetime. Going over this figure incurs tax at a rate of 55% on the excess.

Mick Calvert, head of executive financial planning at Watson Wyatt, says: "In the run up to the changes last year, most employers understandably focused on the pension arrangements of their existing executives.

"But in doing so many did not develop policies to deal with the impact of the new legislation on future hires. Unless consistent policies are put into place, HR and pension managers will find themselves rushed into having to make arrangements for new senior executives on a case-by-case basis, which will be a major time commitment."