Personal Pension  

Osborne urged to scrap plans for Isa pensions

Osborne urged to scrap plans for Isa pensions

Royal London’s group chief executive has called on the chancellor to give up on plans to turn pensions into Isas in this year’s Budget, stating “this is not the time to turn the system upside down”.

Using the opportunity of the mutual’s annual results statement to make his point, Phil Loney argued that the conclusions of the government’s consultation on pensions tax relief should aim for reformation of the current system rather than complete abandonment.

“He [George Osborne] should not take the huge gamble of introducing Isa-style pensions, which would be reckless at a time when the numbers saving into a workplace pension are finally growing following the successful introduction of automatic enrolment.”

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Mr Loney said there remains a considerable risk that moving away from the existing exempt, exempt, taxed system, even with an incentive thrown in, would turn people away from long-term saving.

“Savers will lose the certainty of a tax-relief system that ensures their saved income is not taxed twice, and be thrown into an Isa-style system where they need to believe that future generations of politicians will not renege on the deal and tax their savings when they come to withdraw.”

As for the group’s results for the 12 months ending 31 December 2015, new life and pensions business of £6.7bn was up 40 per cent on the figure for the whole of 2014, driven by drawdown inflows up by over two thirds to £1.3bn.

Adviser view

Mel Kenny, chartered financial planner at Radcliffe & Newlands, said: “Turning the EET [exempt, exempt, taxed] pension rules completely upside down would create absolute mayhem and go against the government preference to nudge. But as it would be a sort of money-spinning exercise they might feel they can get away with early in their government term. Cue protests.”