The Investment Association: Give people the confidence to save in pensions
The Investment Association has today responded to the government's consultation on pension tax relief:
- The focus should be on giving people the confidence to save for the future, including a pledge to leave pensions policy unchanged for the long-term
- The current system of up-front income tax relief on pension contributions should be retained, but up-front relief could be reformed
The Investment Association is today advising the government to focus on reforming pensions tax in a way that gives people the confidence to save for later life.
That means making an iron-clad commitment to leave pensions policy unchanged for the long-term once any reforms are made, allowing the UK to build on the success of automatic enrolment.
Scrapping the lifetime allowance on pensions savings so people save as much as possible for later life would also build confidence, while the annual allowance could in turn be lowered to control costs.
Removing up-front income-tax relief could damage the savings culture and undermine the good work being done by automatic enrolment, the Association also today argues.
The current system could instead be reformed to deliver tax incentives to those who are most in need of support while encouraging a healthy UK savings culture.
The Investment Association has made the comments today in its response to the government's consultation on pension tax relief, 'Strengthening the Incentive to Save', which was issued in July.
Daniel Godfrey, Chief Executive of the Investment Association, said:
"The tax treatment of pensions is becoming increasingly complex and is poorly understood. People will only save for a sustainable income in later life if they have confidence that the pension system offers, and will continue to offer, clear benefits to lock up their savings.
"A reformed system of up-front tax relief, supported by employer contributions, is the approach most likely to support automatic enrolment as it enters a critical phase. For those at risk of under-saving through their lifetimes, it must be clear that it pays to put money aside."