The AITC is proposing three alterntive measures to the plans put forward in the Pensions Green Paper...
The AITC is proposing three alterntive measures to the plans put forward in the Pensions Green Paper.
The first is to propose contributions limits rather than accumulated fund limits; the second is to highlight ISAs as a preferable method of
encouraging savings; and the third is is to create a level playing field between investment trusts and other forms of collective investments for purpuses of saving towards a pension.
The last point reflects the association's role as a voice for the investment trust sector.
A bigger challenge to the government is probably the point on contributions limits.
The AITC says the lifetime fund limit of £1.4m should be scrapped in favour of annual and lifetime contribution limits, as these would be
more likely to encourage savings.
Setting contribution limits of £50,000 per year, or £1m for life, might lead to over-funding in some cases, the AITC admits.
However, that is a better situation to be in than taking the risk of dis-incentivising people from saving towards a pension becuase of a
possible loss of tax breaks, the association says.
Focusing on contribution limits rather than fund limits would also be more in tune with other forms of tax-efficient savings, particularly as
most people expect pension funds to be able to grow tax-free, it says.
The AITC cites the £50,000 limit placed on the handover between PEPs and ISAs as an example of what should not be repeated in the context of
Allowing overfunding is at the end of the day preferable to long-term disinclination to save, it adds.
Coupled with contribution limits should be moves to increase the numbers of companies willing to enter the pensions market, which is
where the association's proposal for using the ISA savings model comes in.
It says that Individual Pension Accounts should be scrapped, and replaced with new IPAs modeled on ISAs, which would boost competition by
encouraging more providers into the market, making available more equity, bond and cash funds.
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