Six of the UK's most important financial services institutions - including the Association of IFAs - have this morning published their own "Budget" report aimed at encouraging people into long and short-term savings.
Called A Budget for Savers, the 28-page document published by the AIFA, AITC, APCIMS, PIMA, ProShare and BSA argues the government is doing little to encourage the 13m people who do not save enough to do so, particularly as the word "saver" has not been heard in the Budget since 2001.
Four key principles are laid out by the six trade groups:
- Making short-term savers long-term savers;
- Making taxes clear, simple and fair;
- Enabling pensions and Sandler products; and
- Developing financial literacy.
In particular, the group suggests short-term savers might be encouraged to become long-term savers - to provide themselves with a financial safety net against the unexpected as well as save for retirement and school fees – if Chancellor Gordon Brown maintained Isas as a tax-efficient vehicle and encouraged workplace provision of investment advice by offering employers tax incentives to do so.
Part of the concern is the government has already laid out proposals to cut the potential investment of Isas in April 2006 from £7,000 to £5,000 on maxi Isas and £3,000 to £1,000 on mini cash Isas, so the group instead suggests the government extend the guaranteed life of Isas beyond 2010 because three out of four cash Isas are taken out by low earners with salaries of less than £20,000.
A last-minute plea has also been presented to the Chancellor to ditch the removal of the 10% tax credit on dividends within equity Isas, as currently proposed for next month, and maintain any 10% tax credit on existing holdings as the group believes “it is unfair to offer a tax-efficient means of savings and then to subsequently erode the investment by changing the tax rules”.
Moreover, a harmonisation of tax rules on investment wrappers might reduce consumers confusion and reduce costs for the industry, suggests the report, through the raising of the Capital Gains Tax (CGT) threshold to £10,000 and exempt those whose proceeds of sale amount to no more than £25,000 in any one year.
Further moves which might make the difference and encourage long-term savings take-up, suggests the group, include the abolition of stamp duty on share transactions at least below £5,000, in part to encourage investment in Aim and Ofex shares, as well as removing the discrepancy between the VAT treatment of managed funds.
As well as key tax incentives, the consensus report also suggests changes be made to provide an alternative to the obligation to buy an annuity at the end of the investment period, perhaps by raising the age 75 rule to 87 in the short-term, and secure the role of advice in Sandler products – an element which the government is desperately trying to avoid.
Comments accompanying the report include those from Paul Smee, director-general of the Association of IFAs who adds:
"Advice and saving are linked; access to advice encourages saving. Increasing access to advice could be achieved by encouraging employers to give their employees access to a financial adviser in the workplace. We urge the Government to consider introducing financial incentives to help persuade employers to introduce this benefit for their employees."
The server is currently down on the Budget for Savers website, but should be active again shortly.IFAonline
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