Ordinary households would like to see greater pensions simplification, particularly in relation to tax incentives, but the Pensions Isa would be a bad idea, Kate Smith has warned.
The regulatory strategy manager for Aegon said that top of the list of saving and pension priorities for most people would be a demand for simplification regarding the way tax incentives are applied to pensions.
Ms Smith said: “While there appears to be real consumer support for a flat government pension contribution incentive, we were concerned that the other idea on the table of Isa-style tax treatment of pension could create a two-tier system.”
This comes after research by Aegon, carried out among 4,000 customers, revealed that and 59 per cent of people said they would save more if they received a 30 per cent government incentive on contributions. Under the current system basic rate taxpayers receive 20 per cent and higher rate payers receive 40 per cent.
The study also showed that 17 per cent of their customers wanted clarity on how much state pension they will receive, while 13 per cent wanted Isa limits to increase.
Adviser view
Roy McLoughlin, IFA for London-based Master Adviser, said: “As someone immersed in auto-enrolment, I have done many talks to customers. When I explain how pensions work, and talk about the tax relief, this gets their attention.
“Youngsters in particular think ‘wow’, and the upfront tax relief resonates with people. This is encouraging them to save, and AE has seen a good take-up. So why rock the applecart by changing a proven system? Do not underestimate the importance of tax relief when saving for a pension.”