Uncertainty coupled with low interest rates risks turning off long-term savers
Aegon calls on the Chancellor to leave pensions tax relief untouched, the introduction of a flexible state pension age and changes designed to address pensions and the gig economy
Steven Cameron, Pensions Director at Aegon, said: “As the UK prepares to trigger Article 50 it is increasingly important the Treasury and DWP align their policies to protect and encourage savers to invest for their futures. The country is facing difficult issues, with an ageing population bringing with it a looming social care crisis and a potential pensions shortfall. Against a backdrop of continued low interest rates, the Chancellor must do everything he can to encourage people to prioritise long-term savings. It might sound simplistic, but in an era of personal responsibility, this is what’s needed.
Leave tax relief unchanged to realise three key benefits
“Specifically, we hope the Chancellor will leave the fundamentals of pension tax relief alone but end the Lifetime Allowance, extend auto enrolment concepts to keep pace with the changing nature of today’s workforce and grant early access to the state pension.
“The benefit of maintaining, without change, the current pensions tax relief system and ridding the UK of the Lifetime Allowance is threefold.
• First it will encourage pension saving more generally and support the ongoing roll-out of auto-enrolment.
• Second, it would play its part in encouraging self-provision for future care needs, something that is essential to prevent the social care system crumbling in the face of mounting pressure.
• Thirdly, any substantive change to pensions tax relief would be in direct conflict to the government’s aim of finding solutions to make Defined Benefit schemes more sustainable and affordable.
Flexible state pension age
“It’s positive that the government is prioritising supporting people to work later in life, but this has to come with individual choice. We hope the Chancellor reinforces this by introducing more flexibility on state pension access. The Cridland Review, which is due to report any time now, should recommend that the Chancellor makes the state pension accessible from earlier, as well as later, ages with the pay-out altered accordingly. Everyone approaching retirement has different needs and circumstances and these must be accommodated.
Pensions and the Gig Economy
“The Government also needs to focus on closing the disparities inherent in the current gig economy, and between the employed and the self-employed. We need to find a solution equivalent to auto-enrolment for the self-employed to halt the growing retirement income divide we’ll otherwise face between them and their employed counterparts when they come to retire.”
Six ways the Chancellor could promote stability and confidence amongst savers
1. End the Lifetime Allowance
2. Commit to the current pensions tax relief system for the duration of this government to avoid destabilising auto- enrolment and Defined Benefit schemes
3. Introduce a pensions saving equivalent to auto-enrolment for the self-employed and those on zero hours contracts
4. Maintain the Money Purchase Annual Allowance at current levels rather that the proposed 60% reduction to avoid undermining the Government’s own initiatives on pension savings and encouraging longer working lives
5. Introduce more flexibility to state pension access: making it available from an early age, e.g. 60
6. Align pensions and social care policy to encourage greater personal responsibility
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