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ABI tax incentivisation roundtable

On Monday (09/09/2013) the ABI hosted its first 'Join the debate' series event where it launched five principles to underpin a better tax incentivisation system for pensions.

Five principles to underpin a better tax incentivisation system for pensions

  1. Be fairer, simpler and easier for people to understand - the more working people who benefit, the better.
  2. Encourage people, particularly those on low to middle incomes to save more - the group most at risk of not making provisions for their future.
  3. Be straightforward to implement - including for employers and the industry
  4. Command cross-party support - we need a stable settlement which can last a minimum of two Parliaments.
  5. Demonstrate good value for money to the Exchequer - it should be revenue neutral or lower cost than the current system.

The roundtable, titled 'One year on from auto-enrolment - what's the next big idea?', was well attended by representatives from ABI member companies and organisations including HM Treasury, Money Advice Service, NEST and Age UK.

It was an opportunity to discuss how best to continue on the success of auto-enrolment, nearly one year since it began.

The ABI's principles represent a significant evolution in its position on pension tax relief and recognition of the fact that we now need a system that is effective for the maximum number of working people.

Others also put forward big ideas on how to push forward the UK savings agenda in a discussion that was chaired by Graeme Cooke, Research Director at IPPR, with main contributions from the ABI Director General, Otto Thoresen, Nigel Wilson, Chief Executive at Legal & General and Jane Vass, Head of Public Policy at Age UK. 

The main themes from the discussion were:

  • The challenging political landscape - it may be difficult politically for policymakers to make radical change to the pensions tax relief system if it is seen to be favouring or excluding a specific demographic. Building cross-party consensus will therefore be key and the industry should develop the stamina to chart a credible course along which that consensus can be built.
  • Justifying the relief costs - at a total cost of around £35 billion, pension tax relief is Government's largest relief, and with the number of pension savers increasing under auto-enrolment there was recognition that this cost is set to become even higher. Any new system should focus on efficiency - delivering good value to the Exchequer and good value to the saver.
  • Communication - people will only be incentivised to save more if they understand how tax relief works. A campaign will be needed to raise awareness and communicate the benefits in a digestible way. The matching contribution format ('for every x you pay, the Government adds y') is an effective potential way forward. 
  • Developing ideas with consumers - the industry can sometimes lack objectivity so it is essential that any new system is designed together with its intended target audience and we must consider how to better engage a younger automatically enrolled generation.
  • Auto-enrolment as a useful framework - we can build people's wider financial resilience by using the workplace as a channel. Auto-enrolment will underpin any future insurance products for long term care costs, for example, and presents opportunities through which we can deliver advice and guidance to consumers.

Otto Thoresen has published a blog on a better tax incentivisation system and the ABI will be discussing its principles at Party Conferences.

Last updated 01/07/2016