Osbourne raises "grave concerns" over personal accounts

Osbourne outlined the Conservative's plans to move the economy away from one built on what he described as excessive debt, to one built on savings and investment.

Primarily Osbourne said that this meant encouraging consumers to save through the tax system.

He said: "This will be a central task for the next Conservative government. We can start by avoiding the uncertainty and damage caused by unpredictable and rushed changes to the tax system.

"The U-turns on ASPs and pension term assurance, the changes to accumulation and maintenance trusts, and the surprise restriction of higher rate tax relief in the Budget are only the most recent examples of the instability that has persistently undermined confidence in the certainty of the tax system over the last twelve years."

Other changes mentioned by Osbourne was the abolition of basic rate tax on savings income.

He said: "We are committed to raising the inheritance tax threshold to £1m so that only millionaires pay tax on what they have saved to pass on to their children."

Meanwhile, the Shadow Chancellor also talked about the Conservative's proposed reforms in the retirement and pensions arena.

For example, he proposed abolishing the current compulsory annuitisation at 75 and to resolve the Equitable Life saga.

He said: "We want to abolish compulsory annuitisation at 75, conditional on having sufficient income in retirement to avoid means-tested benefits.

"And we want to resolve the Equitable Life debacle in a way that is fair to policy holders and restores broader confidence in the industry."

In addition he called on the industry to play their part as well by offering better, more transparent products, and said the government would do its bit to ensure there would be a regulatory system in place to do this.

He said: "I hope that the savings and pensions industry will play its part in re-building our savings culture by providing products that are transparent, reliable and competitive.

"I want to work with you to make sure we have a regulatory system that allows you to do that."

However, Osbourne also raised his concerns over the rules surrounding the incoming personal accounts.

He said: "The introduction of personal accounts is the biggest immediate challenge in this area. It would be a disaster if personal accounts were to end up undermining saving even further instead of encouraging it.

"We have made it very clear that we have grave concerns about the potential for mis-selling to people who risk losing means-tested benefits by saving, the operating costs of the new system – which the government now admits will be much higher than originally claimed – and the risk of employers 'levelling down' the generosity of their pension provision."