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Further reform necessary

The ABI&#39s senior economist believes the pension credit should be one step towards greater reform of the market and that the credit makes it difficult for advisers to know what best advice is.

In his address to the ABI pension credit seminar, Chris Curry detailed evidence that further reform is needed to encourage pension saving.

Other policy options proposed by Curry included increasing the age when the minimum income guarantee is payable, changing the state pension age or even phasing out the pension credit over time for future pensioners.

He also questioned whether incentives such as the pension credit actually make people save for a retirement tens of years away.

Curry argued the pension credit might make it harder for advisers to tell their modest-saving clients in full faith that they will benefit satisfactorily from saving.

He also showed, using evidence from PricewaterhouseCoopers, that by 2050 the extra cost of the pension credit will dent the GDP by 1 per cent.

Curry says: “The pension credit provides a welcome boost to retirement incomes for many of today&#39s and tomorrow&#39s pensioners. The impact on savings incentives will, however, be complex.

“On the whole, the pension credit should encourage more people to save. Further reform may be needed to encourage further saving for retirement. The credit should be seen as a welcome step forward, not the final word.”

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