Govt considers age based pension top-ups

The Government is considering reforms to pension tax relief which would provide bigger incentives to save for younger workers with an aged based system.

Related topics:  Retirement
Amy Loddington
12th October 2016
savings money pension retirement grow

The Times has reported that the Treasury is considering a policy proposal where the Government would offer different top-ups to pensions contributions based on the individual’s age.

Pension platform Hargreaves Lansdown is calling on policymakers 'not to forget the needs of ordinary savers', and said it would be writing to the Treasury to officially recommend an age based system for pension top-ups.

This would be achieved by a government top up of 100 minus an individual’s age: a 25 year old would receive a top up of £75 for every £100 they invest; a 50 year old would receive a top up of £50 for every £100 they invest.


Tom McPhail, Head of Retirement Policy at Hargreaves Lansdown, said:

“Policy initiatives such as auto-enrolment and the new Lifetime ISA are helping individuals to save and invest for their future, however there is still a lot more that can be done. Those who invest well and build even a half-decent sized pension pot are penalised by the lifetime allowance; higher earners are penalised by the annual allowance taper; meanwhile younger, lower earning workers tend to do worst out of the tax relief system.”

Kate Smith, Head of Pensions at Aegon, commented: 

“It’s good to see new ideas being proposed by the industry ahead of the Chancellor’s Autumn Statement. We also support incentives that encourage people to start saving earlier, however under this idea, year after year, the incentive to contribute to pensions would decline which would be a challenging message to handle. Even with generous incentives, it’s arguable that the majority of younger savers will prioritise other goals such as a house purchase, meaning that by the time they turn their attention to pensions, the incentive will already be declining. The reality is that there are already too many people in their 40s and 50s playing catch up today.”

More like this
Latest from Property Reporter
Latest from Protection Reporter
CLOSE
Subscribe
to our newsletter

Join a community of over 30,000 intermediaries and keep up-to-date with industry news and upcoming events via our newsletter.