In a report published this week, the CPS proposes replacing personal accounts with a new defined-contribution, state-sponsored scheme – the flexible retirement savings account – that supposedly eliminates the risk of misselling.
It suggests the state pension should be substantially increased 10 years after retirement age, allowing retirees to concentrate their FRSA-derived income on the first 10 years of retirement – when they are more active.
The FRSA would have contributions totalling 7 per cent of gross earnings – 3 per cent from the employee, 1 per cent tax relief and 3 per cent from the employer. The report says tax relief should be 33 per cent irrespective of a person’s marginal rate.
Those on low incomes would have their contributions topped up by the state under the proposals. The report also suggests allowing savers to bequeath pension assets free of inheritance tax, provided the assets go into a retirement savings scheme.
State second pension cashflows would be re-engineered to help finance the larger state pension and FRSA top-ups.
The CPS says more people would be contributing the full rate of national insurance contributions as contracting-out rebates will have stopped and larger retirement incomes will prompt means-tested benefit payments to fall.
Living Time managing director Dave Harris says: “This report makes some radical and innovative suggestions aimed at building sustainability to Britain’s in-retirement landscape which we hope policymakers in the UK will consider very carefully.
“The proposal to develop flexible retirement savings accounts, which provide greater flexibility, to replace personal accounts demands attention by all those involved in shaping the future retirement planning for the UK.”
What are your views? Are these workable solutions? Should the Government, or perhaps the Conservatives, take heed? Are the current plans for pensions reform adequate? Click on the link below to comment.