The Centre for Policy Studies (CPS) has renewed its calls for a scrapping of pension tax relief and the lifetime allowance, to encourage people to save more and reduce the cost to the Treasury.
The Pensions and Savings Manifesto, written by Michael Johnson (pictured), said income tax relief on pension contributions - that cost the Treasury £30.4bn in 2015/16 - should be replaced by a single 25% ‘bonus' on post-tax pension contributions.
It also said the annual allowance should be reduced from £40,000 to £10,000, as both income tax relief and the allowance benefited only the wealthy.
Meanwhile, scrapping the £1m lifetime allowance was seen as another "much-welcomed" simplification for pensions.
The paper said the measures would simplify the savings arena: "Gone would be the ludicrous complexities such as the high earners tax taper.
"[The proposals] should also leave the Treasury with the scope to realise a net savings of at least £10bn per year (perhaps for a deficit reduction)."
The CPD had outlined its policy proposals for political parties to consider for their General Election manifestos. In doing so it reiterated its previous calls for a radical change to the way pensions are being taxed.
It said the government should aim to increase the household savings ratio from 3.3% to a figure more similar to the 1980s average, of 11%.
Simplifying tax incentives to save was one way to tackle this, according to the paper.
Similarly, the paper suggested combining income tax and national insurance contributions into a single "earnings tax", which "would help prepare the ground for fundamental reform of saving incentives".
'Enhance the LISA'
The paper said the Lifetime ISA (LISA) should be established when a baby's name is registered, with a suggested "kick-start" of £500. It said this would "resuscitate" the Child Trust Fund (CTF), incorporating existing CTFs into the LISA.
It also proposed limiting access to LISA savings until 18 years old, raising the existing age limit from 39 to 49 and reducing the non-property withdrawal penalty charge from 25% to 20%. The paper also put forward raising its annual contribution limit to £8,000 or £10,000, from £4,000, in line with pension pot structures.
It said: "The LISA was so named because the original proposal was for a single savings vehicle to serve from cradle to grave."
The paper also reiterated its calls for introducing auto-protection that was originally put forward in a paper in March. Under the policy retirees would be automatically enrolled into drawdown at private pension age and then, at 80, remaining pots would be automatically annuitised.
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