This article is an external press release originally published on the Landlord News website, which has now been migrated to the Just Landlords blog.
Thomas Selby, Head of News at Money Marketing, was joined by a panel of experts today (8th October 2015) to discuss pension tax relief.
He began by asking Dr Yvonne Braun, Director of Long-Term Savings Policy at the Association of British Insurers, what is wrong with the current system.
Experts Discuss Pension Tax Relief
She responded by simply stating: “The complexity of it.”
She explains that alongside being expensive for the Treasury, the people who need to save “don’t actually understand how it works”.
She reports: “70% of pension tax relief actually goes to higher and additional rate tax payers. Since 2013, we’ve said we need to see reform.”
She believes the complexity arrives through additional rules being added over time and the name. “Call it something different,” she suggests.
And Mick McAteer, the Director of the Financial Inclusion Centre, reinforces Yvonne’s point that the current system “disproportionately benefits the better off”. He wants to see the “maximum number of people in society” benefit from reform.
Although Fiona Tait, a Pensions Specialist at Royal London, believes we need to “sit back and look at the current system”, she thinks there are positives. One is the incentive, which she insists people like. She would want to see this continue, but believes we should “get away from calling it tax relief”.
On the new pension freedoms, Adrian Boulding, the Principal Consultant at Dunstan Thomas, observes that “people with small pots are taking money out” as they are “aware of the freedoms”. But among those with larger sums of savings, he’s seen them “behaving responsibly”.
If the pension system becomes an ISA scheme, Adrian says it will be difficult to keep the employer on board, as the “third leg – the Chancellor” will be removed.
He states: “Workplace ISAs don’t work, workplace pensions do.”
He thinks that if ISAs are introduced, individuals will be on their own, “trying to fund for their retirement through an ISA”.
“You need those two other legs too – the employee, employer and the Chancellor,” he believes.
On a flat-rate system, Yvonne says the message needs to be improved: “Ditch the expression tax relief.”
She suggests a name such as “saver’s bonus”, which is “very plain that you get something on top; if they don’t save, they’ll miss out”.
The full session can be viewed on demand on the website later today: http://www.moneymarketing.co.uk/mmwired-what-next-for-pension-tax-relief/
