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ABI says pension credits for firms could close gap

The savings gap could be closed by as much as £2.8bn a year through a new credit for employers contributing to pension schemes, according to a proposal released by the ABI this week.

In its paper, Closing the Savings Gap: Carrots or Sticks, the ABI says its pension contribution tax credit would cost employers only £60 for every £100 they contribute towards employees&#39 pension plans rather than the £80 they currently pay.

The proposal comes as a survey from Norwich Union indicates that 77 per cent of employers would increase their commitment to occupational schemes “a lot or somewhat” if a credit existed.

The ABI concedes that the credit would not be revenueneutral but says it would only cost the Government £900m a year to knock £2.8bn off the savings gap.

The scheme would operate through employers getting annual tax credits as long as they meet adequate contribution levels and membership size. It would be paid in addition to existing tax relief and National Insurance contribution rebates.

If a small employer contributes 3 per cent to their scheme, they could expect to get 1 per cent of their NI contributions through the credit.

NU raised the idea of a credit similar to the ABI&#39s proposals at the National Association of Pension Funds&#39 conference in May and commissioned the survey, asking 1,000 employers about their attitude toward such an idea.

ABI director general Mary Francis says: “The Government wants to hear good ideas about how we can encourage more people to save more for their old age. Many people are much happier to do so when they see that their employer chips in as well.”

A Treasury spokesman says: “We welcome the ABI&#39s contribution and will consider it when we make our responses to the Pickering, Sandler and Inland Revenue reviews later this year.”

•Comment, p29

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