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‘Pension moves send out wrong message’

Association of Independent Financial Advisers director of policy Andrew Strange

The events of the past two years clearly demonstrate that the country’s reliance on credit and disregard for savings can no longer continue.

Aifa was therefore looking to Alistair Darling to use the pre-Budget report to encourage more people to save and take greater responsibility for their long-term financial health.

Unfortunately, the confirmation in the PBR that pension tax relief for higher earners is to be reduced sent out entirely the wrong message and risks jeopardising the sensible savings plans of wealth creators.

The decision affects the self-employed, entrepreneurs and company directors who typically make irregular annual lump-sum pension contributions. Although this change is restricted to a small group of people, it is a worrying and complicated step by the Government.

Additionally, the decision to phase in the rollout of personal accounts also implies that pensions and savings are not at the top of the Government’s list of priorities.

When it comes to incentiv-ising savings, there needs to be long-term thinking from the Government rather than short-term responses. It needs to embark on a dialogue with the public about the need to save and help get the idea across that savings should be “the first bill you pay”. As a start, it would be useful if we referred to UK citizens as savers rather than the often-used consumers.

Aifa is also calling on the Government to undertake an independent review looking into how a savings culture can be restored in the UK, a culture which encourages people to plan for their long-term financial wellbeing and ensure that debt is manageable.

The review must look to address the regulatory imbalances between savings and borrowing. This should be a political imperative, given the current economic situation.

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