Don’t treat pensions like Isas: Altmann

Don’t treat pensions like Isas: Altmann

Pensions minister Baroness (Ros) Altmann has criticised the idea of pensions and Isas being interchangeable.

The Conservative peer said it would be important to retain the distinction to ensure savings were kept for retirement.

She said that money should be kept in pensions for longer, and Isas might be too easy to spend too soon.

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Baroness Altmann said: “A top-up for pension savings is needed to encourage people to put money in.”

Earlier this month, chancellor of the exchequer George Osborne appeared open to the prospect of taxing pensions like Isas during his Budget speech, when he announced a consultation into the taxation of pensions.

He said: “While we’ve taken important steps with our new single-tier pension and generous new Isa, I am open to further radical change.

“Pensions could be taxed like ISAs. You pay in from taxed income – and it’s tax-free when you take it out. And in between it receives a top-up from the government.”

Before May’s election, Steve Webb, Baroness Altmann’s Lib Dem predecessor, said he wanted to introduce a flat rate of pension tax, set at 33 per cent.

In his Budget earlier this month, the chancellor confirmed the government was pressing ahead with restrictions on pensions tax relief for those with adjusted incomes over £150,000.

Adviser view

Steven Robinson, managing director of Bristol-based Clarke Robinson, said: “I think taxing pensions and Isas in the same way is probably not a good idea. It would undo all the good work which has been done on pensions.”