Savers Need Clarity on Pension Reform

Further reform of the pensions market has the potential to better engage long-term savers, but a lack of clarity could seriously undermine these efforts

Cherry Reynard 9 July, 2015 | 10:33AM

There has been something close to a revolution in the pensions’ market in recent years. People now have unprecedented flexibility to save for and manage their retirement finances as they choose. Yet just as people are digesting their new-found freedoms, the Chancellor has suggested that he is willing to consider even more radical change. 

The details are sketchy. The Chancellor said in yesterday’s budget that he would launch a Green Paper to consult on whether the pensions regime should be more like the ISA regime. He said: “Pensions could be taxed like ISAs—you pay in from taxed income—and it’s tax free when you take it out. In between it receives a top-up from the Government”. He added that the Paper would “ask questions, invite views, and take care not to pre-judge the answer.” 

Pension insiders have long complained that the constant flux in the system makes it difficult to plan. The pensions system is complex, which may deter people from saving. ISAs retain a ‘halo’ effect because they have been relatively immune from government tinkering. Maike Currie, associate investment director at Fidelity Personal Investing, says: “What the current regime could really do with is some stability and relief from further meddling.” 

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About Author

Cherry Reynard

Cherry Reynard  is a financial journalist writing for Morningstar.co.uk.

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