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Early access could signal move to Isa/pension merger

Upcoming Treasury proposals which could allow savers to access a 25 per cent lump sum from their pension fund early may be the first step towards an integrated Isa/pension regime, according to Suffolk Life.

This morning, Money Marketing revealed Government officials are preparing to issue a consultation before the end of the year seeking views on whether the policy could boost saving and the circumstances under which people should be allowed to access their savings pot early.

Suffolk Life marketing director John Moret (pictured) says the proposal could be a step towards a merging of the pension and Isa systems in the UK. He urges Government to present a “clear picture” of how it sees the two regimes co-existing in the future.

He says: “I first proposed early access 10 years ago. At the time no one, including the Tories, were interested. If only the politicians had listened maybe we wouldn’t have the problems with long-term savings that we have today.

“The main problem I have with the suggestion is the lack of clarity around the role of short-term and long-term savings. What we need is a clear picture and statement of how the Government see the two regimes co-existing, although perhaps this is another stepping stone towards the integrated Isa/pensions regime that Michael Johnson and others have been pushing for.”

While several potential models of early access were outlined in a Pensions Policy Institute paper in November 2008, pensions minister Steve Webb has previously indicated a preference for the 25 per cent lump sum model as it “chimes with what’s already in the system”. From April next year, the age at which people can take a 25 per cent of their pot pre-retirement will increase to 55.


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

  1. ISA/Pension mergers – ministers deliberating on yet more rules, regulations and complications.

    The biggest turn-off for the general public on saving for the future are all the petty rules introduced by successive governments – why doesn’t the government simply mind its own business. They tax what you earn and put tax on everything you buy – the least they could do is simply allow people to save without having to worry about CGT, Income tax on interest and dividends, or whether their retirement savings are going to affect eligibility to age-allowance or State benefit.

    If anyone is looking for crooks and liars then it isn’t IFAs they should be chasing. It is the government ministers who constantly change the ‘goal posts’, undermining confidence in pensions and the savings industry as they try to extract more and more from ordinary people’s pockets.

    The first thing that the government should do is to tell the truth about tax relief on pension contribution – it is a complete scam unless you are a higher rate tax payer. On average, a future government will claim back all (or more in real terms) any so-called tax relief on contributions by taxing the annuity payments.

    It is this growing realization (and disenchantment with personal pensions) by Joe Public that is now driving the governments agenda on NEST. It is easier to force all employers to contribute into pension schemes rather than force all employees to do so when the employee would view it as another tax. It is, but it is the employer who will pay it directly – the employee will pay indirectly by smaller wage rises or redundancy.

  2. Give everybody 50% tax relief on pension contributions, do not include income from personal pension policies to be included in any means tested calculations and allow retirement income to be taken directly from the pension fund with any balanced not used to be passed as a pension fund to dependents without tax (creating a family pension fund through generations). I personally believe this will give even basic rate tax payers incentive enough to save and everybody else incentive enough to save into pensions without the fear of IHT implications.

  3. @ Jonathan, and you’d pay for that by…?

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