The Association of British Insurers has held talks with Treasury officials over the possibility of reforming pension tax incentives for UK savers.
The ABI hosted a meeting with representatives from insurers, the Pensions Policy Institute, Age UK, the Money Advice Service and the Treasury this week which looked at the use of taxpayer money to encourage pension saving.
Following the meeting, ABI director general Otto Thoresen set out five key principles to guide future pension tax reforms: that any changes must be fairer and easier to understand; encourage people on low to middle incomes to save more; be straightforward to implement; command cross-party political support; and demonstrate good value for money to the Treasury by being revenue neutral or lower cost than the current system.
ABI head of savings and retirement Yvonne Braun says now is a good time to examine whether the pension system is organised in the most effective way.
She says: “The question is how can we target tax relief to the maximum effect, looking at both the way tax relief is distributed and the way it is communicated.
“We recognise changing the system will be a big challenge but that should not deter us if it is the right thing to do.”
Hargreaves Lansdown head of financial planning Danny Cox says: “Now is not the time to review tax relief. Auto-enrolment has only just started and if we start looking at changing the rules again there is a risk confidence in pensions will be damaged.”
In July, the Treasury said there was a “legitimate public debate to be had” about pension tax incentives after a PPI report found “little evidence” the £35bn a year spent on tax relief actually encourages pension saving among low and medium earners.