PensionsNov 20 2015

Advisers should not fear the move to pension Isas

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Advisers should not fear the move to pension Isas

Advisers should not be concerned about a widely anticipated move to pension Isas, according to David Harrison of True Potential.

The managing partner of the Newcastle-based firm said low levels of savings meant pensions would have to be reformed to work in a way that attracted people.

Mr Harrison said: “Some worry that savers will spend all their money and be left penniless by retirement if they have unfettered access.

“The real problem is that people are not saving adequately in the first place, and we’re all living longer so everyone will be penniless regardless.

“The way to get people saving is to use the mechanism that they understand and like – such as the Isa – then give them the incentive they want, which is access, plus the tools to map out their finances and make meaningful goal-based projections.”

He explained: “Clients understand that their Isa contributions are from taxed income and their growth and withdrawals are tax-free.

“Clearly, that is a model the customer likes, and access to one’s own money is now regarded as a greater incentive than tax relief so let us embrace it.”

A consultation run by HM Treasury into the tax incentivisation of pension savings came to an end in September.

Chancellor of the Exchequer, George Osborne, has said he wants to encourage more people to save into their pension and is open-minded about how to achieve that. In his Budget speech in July he said that pensions “could be taxed like Isas”.

This has been followed by a number of different bodies, such as the Association of Consulting Actuaries, Towers Watson and Morgan Stanley, who have said the introduction of a pension Isa is likely to be imminent.

Adviser view

Robert Forbes, a chartered financial planner with London-based Stadden Forbes Wealth Management, said: “The move to a pension Isa could be a good idea. It is largely about how these things are used. They are just tools in a tool box.”