News

'Not enough tax incentives for pensions'

Current tax incentives for pensions are too low to motivate basic rate taxpayers, it has been claimed.

EveryInvestor said that restrictions on access to capital and strict inheritance rules for pension funds were a major deterrent and it often made more sense for an individual to pay into an individual savings account (Isa).

The firm calculated that with a £200 per month contribution over 20 years to a stakeholder pension (£160 per month net to an Isa), the net income available to the Isa investor would be similar to that from an annuity providing for rising income, yet the Isa investor would still own their capital and have freedom over its use and inheritance.

EveryInvestor editor-in-chief Chris Gilchrist claimed that consequently, it was "no surprise" that regular pension saving continued to decline.

The now-permanent status of Isa tax exemptions should encourage more people to save in this form rather than through pension plans, he added.

He commented: "Since only a tiny minority of the population save over £7,000 a year, we have to question why (from 2012) individuals will have five different possible pension savings schemes, only one of which (Personal Accounts) will actually stack up against the Isa for basic rate taxpayers."

Around two-thirds of Britons say they do not feel financially prepared for retirement, a recent poll from six-steps.org revealed.

Landlord Mortgages “The UK love-affair with property is fuelling property investment as a pension. The young are saving more and more via property investment making Buy To Let one of the decade’s most successful investments. Whilst ISA’s (Individual Savings Accounts) can offer a tax efficient retirement plan the ISA does not offer the same hands on feel as property.”


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