MP recommendations to encourage greater saving, including an overhaul of pension tax relief, have been backed by advisers and pension providers.
The report suggests the government should consider scrapping the pensions lifetime allowance and replacing it with a lower annual allowance.
It says government should give “serious consideration” not just to a flat rate of pension tax relief, but also promote greater understanding that it operates as a bonus or additional contribution.
The recommendations also include scrapping the Lifetime Isa and calling on the FCA to reconsider if savers should take compulsory guidance before accessing their pensions.
Aegon has backed the recommendation to replace the lifetime allowance with a lower annual one. However, it believes any more radical changes would not be feasible until after the conclusion of Brexit.
Aegon pensions director Steven Cameron says: “As we seek to encourage people to save more for their retirement, it is counterproductive to have rules that mean those who ‘do the right thing’ could face an unpredictable tax hit when they reach retirement.”
He adds: “We fully support the Treasury select committee’s recommendation that for those paying into defined contribution schemes, the limits should be based on the ‘annual allowance’ contribution test. This is easy to understand year by year.”
Although Cameron says there may be “a case for a different approach” for those with defined benefit schemes where the benefit is promised in advance with “contributions over the years adjusted to deliver these benefits”, he says the change “could be implemented quickly and would make an immediate difference”.
National advice firm LEBC supports for the need for default guidance for people accessing their pension without taking regulated advice.
LEBC public policy director Kay Ingram says: “We are pleased the committee sees household savings and debt as a key priority for the government to tackle by simplifying some of the tax incentives and encouraging mid-life financial planning”.
LEBC also supports abolishing the lifetime allowance and greater financial education in the workplace.
Brewin Dolphin chartered financial planner Ammo Kambo says auto-enrolment contributions need to increase so savers can build up “significant savings”.
Kambo says: “While we fully recognise the pressures on house-hold finances, starting earlier in your working life has a significant effect on your pension pot, the financial effect of small sacrifices made now will be multiplied in a pension over the long-term.”