For immediate release: Wednesday 8 July 2015
Morten Nilsson, CEO of NOW: Pensions comments on the announcement in today’s Budget that a consultation on pensions tax relief has been published: “With over 55s being afforded greater flexibility with how they access their pension pot at retirement, the nature of pension saving is fundamentally changing.
It’s no longer the case that a pension exists to provide an income for life in retirement, but instead is being redesigned as a long term savings vehicle with no particular destination.
Against this backdrop, changes to tax relief appear inevitable but it’s imperative that any changes are done on the basis of cross party consensus otherwise there is a danger that savers’ confidence in pensions would be further undermined by concerns about shifting taxation goal posts.
While the government is right to consider how it makes pension saving a more compelling proposition for young people, it is questionable whether changes to tax relief would act as an incentive.
To safeguard the long term success of auto enrolment, adequacy of contributions needs to be urgently addressed. While over the long term, serious consideration needs to be given to auto escalation, in the first instance, contributions could be materially improved by removing qualifying earnings.
As a result of the qualifying earnings approach, if a worker earns £20,000 their qualifying earnings would be £14,176 whilst for someone on £10,000 a year, 8% of qualifying earnings actually means just 3.4% of their total salary is being contributed. So when they come to retire, they will have saved less than half what they expected. By removing qualifying earnings and basing contributions on every pound of salary, savers’ pension pots could be significantly improved.”
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Notes to editors
NOW: Pensions www.nowpensions.com @nowpensions
NOW: Pensions is an independent, multi-employer trust serving thousands of employers and hundreds of thousands of employees from a wide range of sectors.
A subsidiary of one of Europe’s largest pension funds, Danish pension scheme ATP, NOW: Pensions offers a simple and cost effective workplace pension solution direct to employers and via advisers and the payroll sector.
In April 2013, NOW: Pensions became the first master trust to attain the NAPF’s new PQM Ready Standard. The benchmark shows employers that NOW: Pensions is a well governed pension scheme with low charges and good member communications.
In January 2015, NOW: Pensions achieved independent assurance of scheme quality in accordance with the new master trust assurance framework AAF02/07 introduced by The Pensions Regulator (TPR) in conjunction with the Institute of Chartered Accountants in England and Wales (ICAEW).
The NOW: Pension Trustee Directors, whose role is to safeguard the interests of members, comprises well-known industry figures with different areas of expertise:
- Jocelyn Blackwell, founding partner Dunnett Shaw
- Christopher Daykin, former Government Actuary
- John Monks, member of House of Lords and former General Secretary of ETUC and TUC
- Win Robbins, former Head of European Fixed Income at Barclays Global Investors
- Nigel Waterson, former Shadow Pensions Minister
Charges are just £1.50 per month administration charge (reduced administration charge of £0.30 – £1.00 to be applied during auto enrolment phasing for lower earners) plus a 0.3% annual product investment management charge, with no hidden charges.