Pension minister Steve Webb’s support for a 33 per cent flat rate of tax relief is a welcome step forward, Michael Johnson has said.
The spokesman for the Centre for Policy Studies called the proposed reform a significant step towards improving defined contribution pensions.
He said: “This reform would be a significant step towards improving the effectiveness of the Treasury’s investment, the purpose of which should be to encourage a broad-based savings culture.”
Mr Johnson proposed the 33 per cent flat rate in his 24-page paper, Retirement Saving Incentives, published in 2014.
The paper suggested that tax relief on pension contributions be replaced by a Treasury contribution of 50p for each £1 saved, up to a yearly allowance, paid irrespective of the saver’s taxpaying status.
Mr Johnson’s comments came after the pension minister announced plans for savers to receive a £1 tax rebate for every £2 paid into a pension.
Adviser View
Clayton Cumming, financial adviser at Glasgow-based Advice and Wealth Management Solutions, said: “There are good incentives already in place, but with the new changes it has made it more attractive and tax-efficient to save.
“The worry is that because pensions are more attractive to do, it could effect saving incentives. But the more you can do to encourage people to save into pensions and make plans for retirement the better.”
