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Do savers back Isa-style pension reforms?


Four in ten UK workers support proposals to reverse UK’s pensions infrastructure so contributions, rather than withdrawals, are taxed, research shows.

A survey of 1,197 working adults, carried out by PwC, found more respondents would rather move to a new taxed-exempt-exempt system than retain the existing exempt-exempt-taxed regime.

While 40 per cent supported the suggestion that pensions could be taxed like Isas, just 27 per cent said the UK should retain the current system, where tax relief is given on contributions, with partial relief on withdrawals.

Respondents told the accountancy firm they would prefer to be taxed while working, rather than in retirement, and that it would add to the simplicity of creating a retirement plan.

Three-fifths of respondents said regular changes by the Government to how pensions are taxed represent the biggest barrier to saving more for retirement, second to a lack of understanding on how much they need to save.

The Government is currently undergoing a consultation on how to tax pensions in future, with an Isa system one potential solution.

However, such a move has also faced criticism, with pensions minister Ros Altmann telling Money Marketing in July that it would represent “a big mistake”.

Philip Smith, head of PwC’s defined contribution pensions team, says: “Our research shows that the current system is far too complicated and continuous changes are putting people off saving more towards their retirement.

“People want a once in a lifetime overhaul of how pensions are taxed to create a simple and stable system which they can understand and trust. Moving towards an Isa-style tax system would create consistency across people’s savings pots and help people plan for their future with more certainty.

“However, moving to a new tax system for pensions is no easy task for an industry that is already grappling with the pensions freedom changes. This would require a huge re-think from employers, pension providers and the Government to how they provide pensions.”



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  1. I guess it just goes to show how little 40% of those surveyed understand. Are they honestly sure that a government of the next 30 years wouldn’t change it again, so that not only were the contributions taxed, but then the income coming out was too…?

    Basically 40% of people surveyed said they trust politicians to not fleece them with more stealth taxes..

    Ironic that everyone seems to have missed the dividend stealth tax in the budget..

    The tax credit was there to give credit for the corporation tax already paid on the amount paid out as dividend, so whilst 85% of people may pay less “personal tax”. The overall tax rate of the “profit” made by the company and distributed will at least be the same and for many will go up.

    In effect the comparison is as follows at an overall rate paid:
    Nil rate tax payer – 20% effective rate now and 20% effective rate post 2016
    BRT – First £5,000 of dividend income, effective 20% rate before and after 2016
    BRT – over £5k divs – 20% rate now, 26% post 2016
    HRTP – 40% now – 46% post 2016
    ARTP – 45% now – 50.5% post 2016

    I’m amazed no journalist or commentator appears to have picked up on this.

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