Strengthening incentives to save for pensions
LITRG welcome the opportunity to respond to this consultation. While noting that the low opt-out figures for the recently introduced auto-enrolment scheme for employees pensions has been encouraging, nevertheless the small sums involved from both employer and employee mean that people are still not saving enough for retirement, especially against the backdrop of the forthcoming flat-rate state pension.
The loss of top-up to the state pension with the abolition of contracted in or out additions mean that future pensioners will have to make greater provision for themselves.
LITRG therefore proposed a standard rate of tax relief for all of 33.3% in order to incentivise those on low incomes in particular to set aside money for later years and possibly a top-up at age 30 to encourage an early start to the savings habit, vital to accumulate the pension pot needed to support maybe 30 years of post-employment life. The competing demands of starting work at the bottom of the salary scale, repaying student loans, saving for the deposit for a house and starting a family make saving for the far-distant years of retirement a low priority and in many cases an impossibility when there simply is no spare money after the basic bills have been paid.
The LITRG response can be found here.
Paddy Millard