AJ Bell comments on changes to pension tax relief
‘Serious danger’ radical tax relief changes will go through because of industry bandwagon mentality, says Andy Bell, chief executive of AJ Bell
Andy Bell, chief executive of AJ Bell, has warned of “a very serious danger that product providers and industry commentators are attaching themselves to radical changes because they are assuming those changes will be made. They are jumping on the bandwagon rather than actually thinking about the right outcome,” he said.
Results of a survey undertaken by the online investment platform provider among 170 advisers showed 59% believed the current system did not need to be changed. This reflected “a heavy dose of realism from the adviser community” that needed to be taken on board by government, Bell said, because advisers were face-to face with consumers every day.
“Our discussions with the Treasury do not suggest there is a foregone conclusion. There is a genuine desire to find the right outcome that meets the Government’s objectives of simplicity, personal responsibility and sustainability. There has been no evidence presented that proves radical changes will encourage people to save more than they do today and if further change did bring further complexity, which is highly likely, it could have the opposite effect. This is clearly what the majority of financial advisers think and they are the ones that spend more time talking to investors than any of us.”
The research showed that 59% of the advisers surveyed do not think the pension tax relief system needs to change. Another third of those questioned supported the move to a flat rate incentive, but there was almost no support for ISA-style pensions.
The main two reasons advisers gave for not supporting changes to pension tax relief were:
a) it is right that tax relief is received at the rate tax is paid; and
b) there has been enough change and a period of stability is required.
The most popular reason given by advisers in support of a change to the system was that the current system was not equitable between tax payers. There was also a feeling amongst 16% of advisers that people don’t understand the current system, meaning it is not an effective incentive to save.
Among the third of the advisers who said they would like to see a flat rate incentive, 25% supporting a flat rate of 30% and 8% favoured a system of matching Government contributions on a two for one basis. Just 4% of advisers said they would like to see introducing of ISA-style TEE (taxed, exempt, exempt) pensions.
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