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Labour is putting Isas before pensions

The one thing that stands out in the Budget is that there appears to have been nothing at all on pensions except a cut in the tax relief on contributions from people earning £150,000 or more.

Still, that can probably be skirted quite easily by the individual’s employing company making the contribution instead, so only the self-employed are likely to be affected.

And this in the face of ever increasing calls for a major overhaul of the pension system to dispel the widespread view among ordinary people that pensions are fundamentally a poor investment proposition.

Contrast with this the significant increase in the input allowances to Isas, which suggests strongly that Labour would prefer people to invest in Isas rather than pensions.

Why? The answer, as usual, is tax, principally inheritance tax, from which Isa funds cannot be shielded. Nor can Isa funds be shielded from the clutches of local authorities if and when the owner may have to go into long-term care.

And, of course, contributions to an Isa do not qualify for any tax relief or National Insurance relief. There is also the risk of Isa funds being plundered to meet short-term cash demands long before the investor ever reaches retirement.

The only merits, although admittedly not insignificant, of Isas by comparison with personal pensions are freedom from the annuity trap and no tax on income. But then, what chance of this Government ever listening to any pleas to address the annuity trap?

Julian Stevens

Harvest IFM, Bristol

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