View more on these topics

CPS: ‘Big bang’ tax relief overhaul needed to complete pension reforms

A new workplace Isa should be introduced at the same time as upfront tax relief on pension contributions is abolished, influential think-tank the Centre for Policy Studies says.

All the major political parties have indicated they would undertake fundamental reform of the tax relief system, with the CPS previously calling for an end to tax breaks on contributions entirely.

Senior research fellow Michael Johnson says the logical extension of the Government’s pension reforms is to replace the current exempt-exempt-tax model with a tax-exempt-exempt system.

He says in this new environment private and occupational pensions could be replaced by workplace Isas. However, he proposes the products should have a “lock up period” where investors cannot withdraw their savings, and be included in auto-enrolment legislation.

Johnson says workplace Isas could also incorporate “auto-protection”, a proposal to default savers into deferred annuities he unveiled in February this year.

He says: “The workplace Isa beckons and, for those without an employer sponsor, alternative (competing) providers should be available, including Nest.  These Isas could incorporate a form of risk pooling in decumulation (i.e. auto-protection), to spread the post-retirement inflation, investment and longevity risks that few of us are equipped to manage by ourselves.

“Participation, however, should be optional, enabling savers to embrace the 2014 Budget’s post-retirement liberalisations (notably, to take cash from pension pots).”

Johnson says the Government should make a quick “Big Bang” transition to a new tax system to avoid the confusion experienced in Australia when it made a similar move.


News and expert analysis straight to your inbox

Sign up


There are 3 comments at the moment, we would love to hear your opinion too.

  1. And this encourages saving for retirement how?

  2. When will these people who know nothing about pensions stop making silly statements? I clearly remember that one pension review (was it Sandler?) that stated that pensions need not be sold by commission hungry salesman, but employees would gladly sign up for a workplace stakeholder pension that every employer should make available to every employee! Result, the death of pensions for employees in smaller businesses.
    Under current AE regulations there is Tax relief for employees and alowable expenses for employers, thus making workplace pensions attractive as it combines free money from employer and free money from thew Government. With this suggestion the free money argument dissapears and the ‘live for today and not the future’ attitude will prevail.
    Just stop and think, research your subject, look at history before sending out silly statement lie this.
    When a government says that the cost of pension tax relief is XX billion, it is nothing of the kind. This is tax that, in the main, is not ever collected as it is a legitimate cost. To enviously look at these reliefs to increase the income and corporation tax take and then reducing the deficit is just unfair as the reduction in lifetime allowance means pensions are for the middle classes and working classes.
    I would wager that the writers have nice secure public sector pensions or are wealthy in their own right.
    I note Andrew Tyrie is on the CPS board, he should be ashamed!

  3. So everybody who is an active member of every pension scheme suddenly has to pay “benefit in kind” charges on the contributions made on their behalf.

    Opt outs for auto enrolment will go through the roof!

Leave a comment


Why register with Money Marketing ?

Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

News & analysis delivered directly to your inbox
Register today to receive our range of news alerts including daily and weekly briefings

Money Marketing Events
Be the first to hear about our industry leading conferences, awards, roundtables and more.

Research and insight
Take part in and see the results of Money Marketing's flagship investigations into industry trends.

Have your say
Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

Register now

Having problems?

Contact us on +44 (0)20 7292 3712

Lines are open Monday to Friday 9:00am -5.00pm