On Monday 25th January 2016 ILCUK held an event prompted by the ongoing government consultation on the pensions system and the use of tax incentives to save. It looked at the implications of reforms to pensions and asked how we can incentivise people to save effectively for retirement.
This report summarises the discussion, drawing upon the contributions of panellists and attendees to present key recommendations for the government to consider. It warns the government against reforming the pensions system in a way which would disincentivise saving, and argues that switching to a ‘Pension ISA’ (where tax is paid upfront) would be highly damaging to saving.
It also finds that under a TEE system, employers would expect their staff to save less and would place a lower value on employer contributions. There is a very real risk that this would ‘kill’ pension saving, as people would not be convinced by the promise of tax exempt withdrawals forty years later.
The ILCUK propose that the Chancellor should use this opportunity to encourage pension saving by reforming tax relief to make it fairer to low earners, and initiate programmes that might help those people to save.