<< Back to News

TISA calls for more flexibility in retirement savings

November 27, 2009

In its Pre-Budget Report submission TISA – Tax Incentivised Savings Association – is reiterating its support for the concept of a Workplace ISA as part of a more flexible savings approach to finance retirement.

TISA originally outlined proposals for a Workplace ISA or an adult style Child Trust Fund as a complement to the traditional pension in 2008. Despite the constructive work underway on Personal Accounts, TISA also recognises the need to create a scheme that will better meet the needs of those who opt out.

Tony Vine-Lott TISA Director General says:

“For some time we have been putting the case for a less restrictive saving scheme as a way of encouraging people to save and take more responsibility for their retirement years. Recent comments from Labour and Conservative politicians and from providers indicate that our proposals are finding favour and I would hope the Chancellor will give a clear signal of intent to move ahead with this concept in his report.”

A Workplace ISA could start from age 18 and have a defined age such as 66 or the State Retirement age. Contributions would be made net of personal tax but would attract NI relief and would be ‘locked-in’ but – unlike a pension – withdrawals would be possible for pre-determined purposes such as house purchase, education and training or on medical grounds. On reaching the defined age the funds would convert to a standard ISA allowing the individual to choose an income in retirement option most suited to them.

TISA is also advocating that the government establish a Retirement Savings Review to consider the effectiveness of current savings schemes, pensions and the impact of the benefits regime to specifically address the needs of those in or approaching retirement. The review would include income replacement, funding of special situations and lack of certainty, particularly of care needs funding.

“Ideally I’d like to see the government draw up a national savings strategy” comments Tony Vine-Lott, “the increase in the ISA subscription limits, the growing usage of Child Trust Funds and new initiatives like the Saving Gateway are very welcome. If we can add the financing of old age care then the concept of saving for life will become a reality.”

Ends

For further information, please contact:

Tony Vine-Lott, Director General, TISA – Tel: 01372 374728, Mobile: 07790 006108Email: tony.vine-lott@tisa.uk.com

Issued on behalf of TISA by Cauldron Consulting, contact Steve Radford – Tel: 020 3178 7238, Mobile: 07889 903786 Email: steve.radford@cauldron-consulting.com

Notes for editors:

TISA’s Pre-Budget Report submission can be viewed in full at www.tisa.uk.com

A summary of the key recommendations is as follows:

A national Savings Strategy
• Improve consistency and integration of savings schemes
• Provision for a Workplace ISA (or Adult Child Trust Fund)
• Provision of a tax beneficial scheme to support old age care
• Set up a Retirement Savings Review

Support for Savers
• TISA welcomes the increase in ISA subscription limits
• Increase ISA subscription limit to £12k
• Re-introduce ISA concession on tax dividend credit

Pensions
• Change to subscriptions for highest rate tax payers
• Direct transfer of trivially commuted pension pots into an ISA without affecting annual subscription limits
• Pension pots under £2000 to be trivially commuted, regardless of aggregate
• An increase in the age of compulsory annuitisation to 80
• Take account of Group SIPP in policy around the future of occupational pensions
• Consider permitting tax free drawdown sums to be transferred to ISAs without affecting subscription limits

ISAs
• In the event of death transfer of all savings/investments in an ISA wrapper intact from one spouse to another
• AIM stocks to be permitted investments in an ISA
• Concern at mid tax year changes to two levels of subscription and new limit

CTFs
• Universal availability is paramount to the scheme’s long term success
• Further efforts to encourage take-up and engagement with the CTF scheme
• Increase subscription limit to £3,600
• Strategy to improve identification of responsible adult for Revenue Allocated Accounts (RAAs)
• Target setting for take up numbers for providers, excluding RAAs
• Confirmation of third payment at age 11, 12 or 13
• Uprate the initial CTF payment to £300 and index link to earnings thereafter
• Introduce matching for less well off children

Savings Gateway
• Direct linkage of Savings Gateway to ISAs or CTFs

SAYE Schemes
• Direct transfers into ISAs

Investment Bonds
 • Transfers to take place without being a taxable event

Equity Release
• Further consider the role of equity release as part of retirement planning and long term care policy

Financial Capability and Savings and Investment Guidance
• TISA seeks to further assist government and the FSA in this area.