White paper: Five proposals to simplify saving

The Centre for Policy Studies has released its proposals to reform pension savings, following the government’s announcement that it intends to review pensions tax-relief.

The paper highlights that Britain’s household savings ratio has fallen to 4.9 per cent – the lowest since records began in 1963. At the same time, it claims that the complexity, cost and inflexibility of the pensions industry is putting basic rate taxpayers off saving for their futures.

Key proposals

• Abolish tax relief on pensions and replace it with bonuses on individual and employer retirement savings contributions. The bonuses would be disconnected from tax-paying status.
• Introduce a generous cap on the total bonus any individual can receive in one year.
• Reform auto-enrolment to scrap the minimum earnings threshold.
• Replace National Insurance contribution rebates with bonuses on employer’s contributions, paid directly into the employee’s personal accounts.
• Introduce a Workplace ISA to house employers’ contributions, locked in until age 60.

Robert Colvile, Director of the Centre for Policy Studies, said: “The proposals put forward in this paper would incentivise mass savings and save the Treasury an estimated £10 billion a year.”