Pensions  

Steve Webb: Pension Isa will not fly

Steve Webb: Pension Isa will not fly

The idea of treating pensions like Isas is just that: an idea that will not fly, Steve Webb has said.

The former pensions minister - the longest-serving in decades, with five years under his belt - claimed the recent consultation on pensions taxation will not result in the creation of a pension Isa.

Addressing a packed room at the FTAdviser Retirement Freedoms Forum in Chepstow, Mr Webb told delegates: “I do not see the Pension Isa flying.

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“The chancellor will not do something where, in the future, we have a world where demographically everyone is old and nobody is paying tax in their old age.

“It does not make sense”.

Mr Webb, who will take up a new role as head of policy at Royal London in November, said the current tax environment had acted as a brake on people spending the lot as soon as they could access their freedoms.

“But if we went towards a pension Isa then there is no brake on people taking out all their money and blowing the lot.

“That is one of the reasons I think that the Pension Isa is not a good idea”, he added.

He also predicted that while the government would want to gain billions from pensioners - roughly £1,000 from 10m people - it would simply ‘rebrand’ tax relief on pensions as a government match - for example, the employer pays in £1, the employee pays in £1 and the government adds £1 as a ‘match’.

“Count the silver if you hear this because it means that the government has implemented a flat rate of tax which it will present as a match.

“It is clear the government wants to gain billions in tax revenue and future generations can go whistle - that’s a technical term,” Mr Webb added.