Public hostility towards the pensions industry contributes to Britain’s lack of a savings culture, according to a report by Michael Johnson, research fellow at the Centre for Policy Studies.
The report, Put the saver first: catalysing a savings culture, puts forward 104 recommendations, including 19 primary proposals, for reform of the pensions industry.
Specifics proposals for the industry include establishing:
- An industry-wide defined contribution (DC) pension pot consolidation service, which should facilitate the payment of contributions and transfer values, with a bridge across to the national employment savings trust (Nest); and
- An annuities clearing house, in which all annuity providers participate. The annuity open-market option should be replaced by mandatory exercise through the clearing house, which should offer a limited number of simple, standardised annuity contracts, plus a more tailored suite of enhanced annuities.
Proposals for the government include:
- Ideas to address Nest’s uncompetitive structure.
- Improving the effectiveness of the £30 billion spent annually on tax relief.
- Cash incentives (and a safe harbour) should be offered to employers that persuade employees to increase their pension contributions above Nest’s 4% of band earnings.
- Reinstatement of the 10p tax rebate on dividends and the replacement of the 25% tax-free concession on lump-sum withdrawals with a pre-annuitisation reward of 5% of pot assets.
- Simplification of the tax regime for investment products by ending the separate treatment for products with embedded life insurance.
Read the full report
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