Association of British Insurers director general Otto Thoreson has backed calls for a fundamental review of pension tax relief.
Earlier this week, Money Marketing revealed the Treasury had set its sights on pension tax incentives after an independent report from the Pensions Policy Institute concluded the current system is skewed in favour of high earners.
A Treasury spokeswoman said there is a “legitimate public debate to be had” about the tax reliefs offered to people who save into a pension. Labour has previously called for a fundamental review of the pension tax system.
Thoreson says: “This report from the Pensions Policy Institute is an important contribution to a debate whose time has come. We need to agree how to incentivise pension saving effectively.
“This is a really important debate for consumers, employers, the pensions industry and politicians to get involved in and the ABI and its members are keen to see fresh ideas brought to the table.”
Partnership chief executive Steve Groves says: “Pension tax relief is designed to encourage people to save for their retirement.
“However this is simply not working in the current system for the vast number of people on low and middle incomes who currently lose disproportionately as they receive the minority of tax relief.”
The PPI report sets out possible alternatives to the existing system, including introducing a 30 per cent flat-rate of pension tax relief and capping the amount of tax-free lump sum a person can receive when they retire at £36,000.
Keyte Ltd director Robin Keyte says: “Automatic enrolment is a huge reform which will change the savings landscape in the UK. The focus should be on making that work and not chasing potentially destabilising changes to the tax system.”