The IMA does not support the concept of a retirement Isa, according to Alan Burton, chairman of the ...
The IMA does not support the concept of a retirement Isa, according to Alan Burton, chairman of the IMA, as it will only add to pensions' apparent complexity.
In a keynote speech to delegates at the IBC Unit Trust and Oeics Conference in London last week, Burton criticised the complexity of current pensions and the associated tax regime, saying a combination of the two has resulted in the high cost of pensions and savings advice.
Burton said: 'The problem is that the need to meet the regulators' quite rational demands for appropriate suitability of advice and full disclosure, coupled with product complexity and multiple tax regimes, has priced a large part of the population out of the market, making it increasingly the preserve of the wealthy.
'Access to wider choice needs to be introduced in a way that avoids adding a further layer of complexity to an already complex industry. For this reason, we have not supported the Pima proposals for a pensions Isa with yet another tax regime, even though the concept has merit.'
In an industry already littered with acronyms such as DB, DC, GPP, Sipp, MIG, IPA, AVC and FSAVC, a simplification process is necessary. 'The IMA has proposed to both the Sandler and Pickering reviews and the Inland Revenue that what is needed is a mass market product along the lines of a Sipp that can hold unit trusts, Oeics, life company funds, investment trusts or any other approved vehicle,' said Burton.
Cat standards and stakeholder have both been disappointing, he added, mainly because margins are inadequate to cover the cost of the advice or support a sales process. 'Less qualified staff only allowed to sell 'approved products' may help but the market must be allowed to set its own price levels,' Burton argued.
'Simplification of tax regimes will greatly benefit consumers. Lower costs of basic tax advice will allow for better investment decisions and, for pensions, removal of contribution limits will have the added effect of cutting administration costs.
'Simplifying products, especially the tax rules surrounding them, will have a beneficial effect on the current advice process and, as a consequence, the savings ratio. The cost savings for pension providers will give them a chance to run low-cost products on profitable terms.'
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