Cross party consensus has been achieved on the principle of personal accounts, but discussions are still ongoing about the details of the new system, says George Osborne.
Speaking at the Association of British Insurers (ABI) conference: ‘Thinking for Tomorrow’, the Conservative Shadow Chancellor confirmed there is some consensus on key elements of pension reform – such as raising the state retirement age – which “is good”.
But he points out while politicians agree people have to save more and have achieved cross party consensus on the principle of personal accounts, he says there are still issues with aspects such as the level of the contribution limit.
He adds: “There are still plenty of details, and in many cases we are reflecting the concerns in Parliament of the ABI and its members. Although it has to be said the relationship between the government’s pensions Ministers and the Shadow pensions team is much better than the one between the Treasury and Shadow Treasury.”
In his speech, Osborne also provided a strong hint the Conservatives may include in future policies the possible abolition or reduction of stamp duty on shares, as he points out it is not just financial services which are losing out by this policy, but also ordinary people.
He argues investments in Child Trust Funds are reduced by about £200, and using findings from the Oxera study, commissioned by the ABI last week, he says stamp duty reduces the value of the average occupational pension fund by almost £12,000, and depresses share prices by up to 7%.
Osborne says: “The research suggests removing stamp duty would result in a permanent rise in GDP, which could lead to a £4bn increase in tax revenues. Economic stability will always be our first priority and I am not writing my 2010 Budget in 2007.”
“But I think there is now a powerful case for abolishing or reducing stamp duty on shares and we will continue to consider this issue carefully over the period ahead."
Meanwhile the Shadow Chancellor also announced the establishment of a ‘Retirement Pensions and Savings Group’ to be led by Phillip Hammond, Shadow Secretary for Work and Pensions.
He says the group will specifically look at whether the Conservatives previous policy commitment to abolish compulsory annuitisation at the age of 75 “is still the right approach”.
Osborne says: “I think the Treasury is unnecessarily worried about this [annuities] as if people have saved all their lives for a pension they are going to act responsibly and not spend it all.”
However, he suggested the Conservatives might introduce a requirement for people to annuitise at a certain level in order to keep them off state benefits, although he warns the intended tax treatment of any residual funds had still to be decided as he points out the Party is still investigating the merits of abolishing compulsory annuitisation.
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