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B&CE, provider of The People’s Pension, has called for the current system of pensions tax relief to be replaced by a flat rate (set high enough above the basic rate to encourage higher earners to save) or matched government contributions.
The call comes as part of the not-for-profit’s response to the government consultation on tax relief, ‘Strengthening the incentive to save’.
The provider has also called for a greater focus on outcomes, on sustainability and stability, and on ensuring intergenerational fairness.
Darren Philp, Director of Policy and Market Engagement at The People’s Pension, said:
“The current system of tax relief is simply not fit for purpose. It does little to act as a real incentive to save for the majority of the population, it is poorly understood, and it is highly questionable whether the taxpayer is getting value for money.
“The system needs to be refocused so it supports all those saving for retirement and provides a clear and easily understood incentive to save. It also needs to focus on incentivising people to reach a target outcome, and to be stable and fair to this and future generations.
“In the short term, the government should consider creating a parallel regime for pension style ISA’s accompanied by an up-front match. This could lead the way for better long term saving options to be developed in the future, and would enable the pensions industry to innovate and provide products that meet the needs of pension savers.
“Bolder and more radical wholesale reform should only be undertaken as part of a wider review of pensions post the implementation of auto-enrolment. Such a review should also include contribution levels and compulsion. We think the time is right for another independent pensions commission to step back and look at the whole system in the round.”
Notes to editors
About The People’s Pension
The People’s Pension is the largest private sector mastertrust (multi-employer pension scheme) in the UK, with 1.6 million members and over 14,000 employer accounts.
Run by B&CE, a not for profit company, it offers a simple and low cost automatic enrolment workplace pension solution for employers of any size from any sector.
We tweet as @peoplespension.