AWD Chase de Vere, the Independent Financial Advisers, has called for 100% initial tax relief on pension contributions to encourage lower earners to save for their future.
The amount of 100% initial tax relief should be dictated by what is affordable, a figure of between Ã‚Â£1,000 and Ã‚Â£5,000 per annum may seem reasonable. The cost of this can be offset in part by reducing the annual pension allowance to a much lower figure, perhaps Ã‚Â£20,000 or Ã‚Â£30,000 per annum.
To further encourage lower earners to invest, pension savings up to a certain level must not be taken into account when determining means-tested benefits.
Patrick Connolly, Head of Communications, AWD Chase de Vere, said:
“If the Government focuses on cutting back pension benefits for high earners this will not address the real problem we face, which is that people are not saving for their retirement and are likely to become a burden on the State. A burden we cannot afford.
“Lower earners will not invest when they face pension regulations they don’t understand, an industry they don’t trust and the risk of losing means-tested benefits if they do make any pension savings.
“We must give people a real incentive to save for their retirement. This can be achieved by providing more attractive initial tax relief on some pension savings, simplifying pension rules and regulations, introducing a pension annual allowance similar to the ISA allowance and ensuring that people are not put off saving by the potential impact on means-tested benefits.”