Centre for Policy Studies report puts forward recommendations for pensions industry reform

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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