Almost 60 per cent of the 170 advisers questioned by AJ Bell reckon the existing system of pension tax relief does not need to change.
The main two reasons given for not supporting changes to pension tax relief were that it is right that tax relief is received at the rate tax is paid (42 per cent) and that there has been enough change, with a period of stability required (40 per cent).
Following the summer Budget, the Treasury published a green paper which proposed that pensions contributions could no longer be tax free, but withdrawals would be. This Isa-style ‘taxable-exempt-exempt’ system was proposed alongside a couple of other options, one of which being no change.
With 59 per cent of advisers favouring the status quo, within the other 41 per cent that did support a change to the system, the most popular reason was because of the inequity between tax payers, according to 27 per cent of advisers.
There was also a feeling, amongst 16 per cent of those surveyed, that people do not understand the current system, meaning it is not an effective incentive to save.
Only a third of the advisers questioned would like to see a flat rate incentive, with 25 per cent supporting a flat rate of 30 per cent and 8 per cent favouring a system of matching government contributions on a 2 for 1 basis.
Just 4 per cent of advisers would like to see Isa-style taxable-exempt-exempt pensions.
This stance has been backed by several providers during the consultation period, which finished earlier this month.
Andy Bell, chief executive of AJ Bell, warned of a “very serious danger” that product providers and industry commentators are attaching themselves to radical changes because they are assuming those changes will be made.
“They are jumping on the bandwagon rather than actually thinking about the right outcome.”
He said that AJ Bell’s discussions with the Treasury do not suggest there is a foregone conclusion, rather a genuine desire to find the right outcome that meets the government’s objectives of simplicity, personal responsibility and sustainability.
“There has been no evidence presented that proves radical changes will encourage people to save more than they do today and if further change did bring further complexity, which is highly likely, it could have the opposite effect.
“This is clearly what the majority of financial advisers think and they are the ones that spend more time talking to investors than any of us.”
peter.walker@ft.com
