The Investing and Saving Alliance (Tisa) has called for the regulatory regimes for defined contribution (DC) pension schemes to be aligned, also backing calls for DC tax reform.
Tisa head of retirement Renny Biggins, explained that the advent of auto enrolment has resulted in "millions of DC savers spanning across two different regulatory regimes".
“The separate regimes governed by DWP/TPR and FCA necessitate the need for separate regulations, even when the separate regulations have the same consumer objective," he noted.
“This creates a mismatch in the outcomes and inconsistent consumer journeys. This leads to confusion and disengagement – particularly as we are seeing an increasing number of consumers who are members of schemes which span across both regulatory regimes."
In light of this, Tisa recommended that the regulatory regimes for DC pensions be combined into one single regime, which would mean that all DC pension savers benefit from consistent consumer journeys, levels of protection and opportunities.
According to Biggins, this shift would also simplify the pension framework, as well as potentially assist in "boosting consumer engagement, knowledge and ultimately retirement outcomes".
In addition to this, Biggins has echoed recent calls for the government to reform pensions tax, warning that the current pension tax allowances can "discourage pension saving and dilute or even obstruct wider government policies."
"Tax relief should be an incentive for pension saving, however we are seeing some of these currently have the opposite effect," he stated.
"Recognising the significant differences between defined benefit (DB) and DC, our proposals only relate to DC however there should be a separate review undertaken to review DB allowances."
In particular, Biggins suggested that both the lifetime allowance (LTA) and Tapered Annual Allowance (TAA) should be removed.
He explained: “Consumers who are currently approaching the LTA are stopping pension saving to avoid the 55 per cent tax charge that applies to any savings that exceed the threshold, whereas the removal of this would lead to bigger pension pots and the ability to spend more in retirement.
"This group may be also more inclined to invest in productive finance opportunities but have no incentive to do so.
“The TAA is incredibly complicated, even for financial professionals to understand and with the proposed removal of 45 per cent higher rate tax, this complication needs to be removed."
Biggins also suggested that the money purchase annual allowance is "no longer suitable", stating that the previous level of £10,000 should be restored, particularly following the impact of the pandemic and cost-of-living crisis.
Industry experts have repeatedly called on the government to reform or review pension tax allowances, particularly after the Chancellor failed to include any mention of pension tax reforms in his recent emergency mini-Budget.
Recent Stories