In a review of the pension system, published today, the insurer proposes a series of reforms it believes will make retirement saving more attractive.
Aviva says 83 per cent of people surveyed for the review do not understand how they benefit from tax relief.
The firm proposes a “harmonised” rate of relief of 30 per cent be adopted to replace the “confusing higher and lower-rate tax relief system”.
It says the change would benefit and encourage the 85 per cent of people who are basic-rate taxpayers and could add more than 14 per cent to the value of their pension fund at retirement.
Aviva has also proposed allowing early access to pension savings, which is something the Conservative Party is leaning towards, as revealed in this week’s Money Marketing.
The insurer says tying up cash until retirement is a significant barrier to pension saving and proposes allowing pension savers to withdraw a portion of their pension savings before retirement in certain circumstances in a bid to remove the psychological barrier to long-term saving.
Thirdly, Aviva is calling for pension credit to be abolished and replaced with a higher basic state pension of £130 for all instead of the current £95.25 a week. This will be funded by new National Insurance contributions for those above a certain income in retirement.
Aviva says the revised system would be easier to understand, help those most in need and be revenue neutral to the Government.
Head of pensions Paul Goodwin says: “Our proposals will make pensions saving simpler, more attractive and encourage people to save during their working life for the time when they are retired. They simplify pension rules and introduce much-needed flexibility when it comes to accessing money saved into a pension.”