Hargreaves Lansdown has written to the Treasury ahead of the Autumn Statement, recommending reforms to the pension and ISA rules.
The firm believes that consumers could be helped to save and invest for their future, if the government simplifies the rules for ISAs and pensions and targets its top-ups more effectively.
Hargreaves Lansdown recommendations include:
- abolish pension tax relief and replace with a simple system of age-based top ups;
- innovative government bonus of ‘100 minus age;’
- abolish complex and punitive rules restricting pension savings of higher earners;
- consolidate multiple ISA regimes into one ‘super-ISA;’
- cut pension Annual Allowance to £20,000 a year;
- combined ISA and Pension savings allowance of £80,000 a year for couples;
- early pension access and ‘help to buy’ style ISA bonus for first time buyers.
Head of retirement policy Tom McPhail said: “Policy initiatives such as auto-enrolment and the new Lifetime ISA are helping individuals to save and invest for their future, however there is still a lot more that can be done. Those who invest well and build even a half-decent sized pension pot are penalised by the lifetime allowance; higher earners are penalised by the annual allowance taper; meanwhile younger, lower earning workers tend to do worst out of the tax relief system.
“With the impending launch of the Lifetime ISA, investors will have around half a dozen different tax privileged savings products, all with their own unique terms and thresholds, competing for attention. The LISA is a good product for the right investors but there is now a real risk that more products will mean less overall savings.
“Investors want a simple savings system which helps and rewards those who want to do the right thing. There are generous incentives available from the government but the rules are riddled with complexity and inconsistencies. Our proposals would mean a fairer system with more efficiently targeted incentives, which would help to engage younger workers with retirement saving.”