In this year’s budget we want to see changes that will benefit those who need most to boost their retirement savings and simplify the savings landscape, including a reform of pensions tax relief, the removal of the net pay anomaly, and the scrapping of the Lifetime ISA. Contributor Gregg McClymont, Director of Policy & External Affairs – The People’s Pension.
The current system of tax relief is confusing to most people and favours a minority of higher earners. It’s time for the government to introduce a flat rate savers’ bonus. For every £1 saved the government could add 25p. Clearly, there are issues to be worked through on the DB side, and the government should commit to doing so.
Currently, more than a million low earners, whose pension provider operates what’s called a net pay arrangement, could be missing out on 20 per cent tax relief through no fault of their own. It’s unsustainable for Government to automatically enrol millions of people into pensions and not ensure that the system works fairly on their behalf. It’s a scandal waiting to happen, at a time when maintaining public confidence in auto-enrolment is crucial.
Finally, we’re calling for scrapping of the Lifetime ISA (LISA). With nearly 10 million people now saving for retirement through automatic-enrolment, the focus should on making this long term savings vehicle work. The LISA is confusing, dilutes the simplicity which made ISAs popular in the first place, and has had very low take up. Scrapping it would be a contribution to joined up government thinking on long term savings. This package of measures would simplify pension saving and re-direct incentives to save at those on middle incomes.