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Government urged to reconsider proposed pension reforms

NAPF says the reforms are 'bad news' for the less affluent, employers, pension schemes and the exchequer

1 October 2015

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The National Association of Pension Funds (NAPF) has said that the government's plans to change the pension tax regime to either 'taxed, exempt, exempt' (TEE) or a single rate, is a short-term strategy with no long-term benefits.

The Association says 'there is no evidence to show that savers would save more as a result of further changes to the system'.

The treasury's consultation, 'Strengthening the incentive to save: a consultation on pensions tax relief', has been issued due to a 'substantial increase in life expectancy' which requires a new 'sustainable system'.

Joanne Segars, chief executive of the NAPF, drew attention to the fact that the government is, in her eyes, pursuing two goals which are unachievable side by side.

'The government must be straight with savers, schemes and employers about what it is really trying to achieve with these reforms. It says it wants to incentivise saving but it also wants to increase the revenue to the exchequer - but these two objectives are incompatible and lead to quite different courses of action.

'There is a very real risk that to increase the tax take in the short-term the government will gamble away the long-term interest of savers.'

Segars' comments echo those made by industry figures since the pension reforms were announced in 2014.

The coalition government received a lot of public approval for removing the shackles from pensions, and during the 2015 election campaign, pensions featured heavily in all of the political party manifestos, all of whom attempted to tap into their ability to garner votes.

The issue is that every incumbent party will alter pension provision for the short-term gain of public approval, with only a small consideration paid to their long-term effects on the public's appetite to save and the effects on the exchequer's tax intake.

'Our message to the government is clear; do not act rashly and put at risk the very real success of automatic enrolment.

'Rushing these reforms will be bad news for savers with less money going into their pension pot each month, bad news for schemes with a massive amount of additional administration, bad news for employers with a big bill to pay for all the changes and bad news for the exchequer with less money being paid in tax in the future.'

 

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Pensions