Treasury proposals to allow savers to access a 25 per cent lump sum from their pension fund could be the first step towards integrating the Isa and pension tax regimes, according to Suffolk Life.
Last week, Money Marketing revealed that Government officials are preparing to issue a consultation later this month assessing the merits of increasing the flexibility of pensions. Any policy is likely to include significant restrictions around how and when a person can raid their savings pot.
Suffolk Life marketing director John Moret believes the forthcoming announcement could be a precursor for merging pensions and Isas. He is calling for greater clarity on the roles of short-term and long-term savings in the UK.
Moret says: “The main problems I have with the suggestion are the lack of clarity over the role of short-term and long-term savings. We need a clear picture and statement of how the Government sees 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.”
Centre for Policy Studies research fellow Johnson drew up plans for a simplification of the pension tax regime earlier this year in a paper entitled, Simplification is the Key: Stimulating and Unlocking Long-TermSaving. He said policymakers need to take a “harder look” at the tax framework in its entirety, including the potential for the harmonisation of rules on Isas and pensions.
LV= head of pensions Ray Chinn points to research which suggests that 24 per cent of people over 50 would have saved more into their pension if they had the ability to access their pension fund early. He says: “We would welcome this flexibility being introduced to encourage more people to increase their provisions for retirement.”