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Ros Altmann: Pension Isas would have been a disaster

Ros Altmann

Pensions minister Baroness Ros Altmann has slammed the Treasury’s shelved proposals to tax pension contributions in line with current rules on Isas.

Altmann has long been a vocal opponent of the plans, telling Money Marketing in July last year that such a move would be “a big mistake”.

Speaking yesterday at an Association of British Insurers conference in London, Altmann said she was relieved Chancellor George Osborne had opted instead to introduce a new, optional Lifetime Isa, rather than redraft pensions tax relief in its entirety.

She said: “Turning pensions into Isas would be a disaster. It would destroy pensions as we know them.

“Pensions have the right behavioural nudges for people. You get an incentive on the way in, you get employer contributions, and then when you come to the point later on, you have a built-in brake on spending your money too quickly.”

Altmann demurred on whether she had managed to convinced Osborne of her arguments, but added the Lifetime Isa would have benefits for self-employed people in particular.

She said: “If you are an employee, and you have an employer, the best thing you can do is have your money in a workplace pension.”

Fernquest Financial Planning IFA Luke Fernquest says: “I don’t think anybody wants the current regime to end, so it’s good to see Ros has come out like this.

“But what our clients really want is a sense of long-term commitment to a simple system, so we will have to wait and see if she can convince the Chancellor.”

AJ Bell head of technical resources Gareth James says: “In scrapping plans to announce the pensions Isa in the Budget, the Government acknowledged flipping the tax relief system on its head is not a silver bullet solution.

“However, the fact radical reform hasn’t been ruled out breeds uncertainty, so the Treasury now needs to be straight with the public about how it plans to proceed.

“I’m unconvinced a pensions Isa would destroy pensions as people will always need to save, but the case for change needs to be sound. The last thing we need is change for change’s sake.”

Altmann also called on providers to play a greater role in publicising the attractive traits of pensions more generally.

She said: “Pension providers could get together to fund a publicity campaign for pensions generically,” suggesting that such a campaign coupld explain the merits of pensions, as opposed to other methods of savings.

“[Through auto-enrolment] the Government is handing the industry millions more customers on a plate. This is a tremendous opportunity for the industry to engage with those people in ways you never have before and help them understand why pensions are so precious.”

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Comments

There are 5 comments at the moment, we would love to hear your opinion too.

  1. The minister seems very confident that it the Chancellor has given up on the idea of pension ISAs. She seems not to be worried that it will come back post the referendum result. I wonder is this from talking to the Treasury bods and getting confirmation that it is just shelved or whether she is expecting a different Chancellor post the referendum. My own impression is that if the current Chancellor is still in place in the Autumn, the pension ISA will be firmly back on the table – and it would appear to be a natural follow-on from the LISA.

  2. Perhaps we can now focus on an amnesty for those members who have protected tax free cash and wish to transfer to a ‘sensible’ plan to take advantage of the new pension freedom rules. Also, moving the ubiquitous pension age 75 Govt. penalties, to be in line with the State Pension age, to age 78.

  3. And most of the other rules and changes have been such an unmitigated success?

    Come on Ros, you are the Pension’s minister – how much notice does Osborne take of you? Precious little it would seem. You’re too valuable to be a political hack.

  4. I’m inclined to agree with Tom Murray. The idea of the Pension ISA may have been put on hold, but I don’t think it has in any way been kicked permanently into the long grass. Only sustained resistance from a broad swathe of MP’s is likely to prevent Osborne from dusting it off and bringing it in as soon as he can.

  5. Michael Johnson 21st April 2016 at 1:49 pm

    Could someone please tell me what a “pension ISA” is ?

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