Govt think-tank calls for end of workplace pensions

Traditional occupational pensions should be replaced with workplace ISAs, according to the Centre for Policy Studies.

The Workplace ISA and the ISA Pension briefing note published 3 July, urges the government to stop tinkering with pensions and instead undertake bigger reforms.

Research fellow Michael Johnson argues that replacing an occupational pension with a workplace ISA would simplify the UK savings landscape in line with what people want from a savings product. In addition, he argues it would make a reduction of up to £10bn on the deficit.

Last year the CPS published proposals to abolish all income tax and employer national insurance contributions relief on pension contributions, to be replaced by a redistributive 50p incentive per £1 saved, paid irrespective of tax-paying status. 

However, the Conservative Party’s 2015 manifesto instead proposed to reduce tax relief on pension contributions for those earning more than £150,000 a year
reducing it from £40,000 to £10,000 by the time income reaches £210,000.

Johnson believes the prospect of a workplace ISA, operating within the auto-enrolment arena is attractive.

“This could lead to an ISA Pension, a regular income stream derived from the liquidation of Workplace ISA assets. It would be tax-exempt, consistent with ISAs’ TEE tax framework,” he said.

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