Royal London group chief executive Phil Loney is pushing for the Government to scrap the tapered annual allowance for higher earners, branding it “hopeless” and overly complex.
Since 6 April, individuals with “adjusted income” over £150,000 will see their annual allowance reduced from £40,000 down to £10,000 for those earning over £210,000.
Adjusted income is defined as the individual’s net income plus pension contributions, less relief on contributions and certain lump sum death benefits.
Speaking to Money Marketing, Loney says it is time to abandon the measure brought in by former chancellor George Osborne.
He says: “For the last three years there has been so much uncertainty around pensions, and frankly pensions have become more politicised than I can remember them being. All the speculation does is undermine confidence in pensions.
“The ‘taper’ policy for higher earners around limits on their contributions is hopeless – how can anybody understand where they are in terms of their pension contributions? We would like to see that got rid of. We’d like to see a period now of supporting pensions and having a positive pensions agenda rather than austerity being the main driver of the approach.”
Loney also wants to see more done to take auto-enrolled employees beyond the agreed 8 per cent minimum pension contribution.
He says: “There is one big issue that should be on the table as far as auto-enrolment is concerned. We have a plan eventually to get people to save 8 per cent into their pension, that’s about half the amount they need to save. So the question is, how are we going to close the gap?
“We’ve been talking a lot to Government and publicly about the idea of auto-escalation, where a proportion of a pay increase or bonus defaults into a pension, with the ability to opt out. We think that is the biggest game in town now in terms of pensions policy.”
His comments come as Royal London posts a 28 per cent rise in advised new life and pensions business, from £4.8bn to £6.1bn as at 30 September.