Two-thirds (67%) of respondents believe an individual savings account (Isa)-style tax system for pensions would result in a reduction in the amount employees save into their pension, according to research by insurance provider Aviva.
Its survey of 118 Friends Life (now part of the Aviva Group) corporate pension clients also found that 52% of respondents would lower their benefits spend or level down pension contributions if an Isa-style system was introduced and national insurance contribution (NIC) relief on employer contributions abolished.
The research also found:
- 10% of respondents would absorb extra costs that may arise from an Isa-style system, where employer and employee pension contributions are subject to tax.
- 82% say it is very important that NIC relief continues to be applied to employer contributions.
- 80% of respondents believe that a matching system, where the government contributes £1 for every £2 saved, would encourage employees to save the same or more into their pension.
A government consultation on pensions tax relief closes today (30 September 2015). The consultation, which was announced by Chancellor George Osborne in the Summer Budget, aims to establish whether reforming pensions tax relief or maintaining the current system would best incentivise people to save for retirement, while providing the highest degree of transparency and simplicity.
Andy Briggs (pictured), chief executive officer UK and Ireland Life at Aviva, said: “The clear message from employers is that an Isa-system is likely to reduce pension saving levels, including their own contributions.
“Employers make around two-thirds of all contributions to pensions so how they are incentivised to contribute is very important.
“The title of the consultation is ‘strengthening the incentive to save’ but it appears that employers don’t believe that a move to an Isa-system would achieve that.”