Retirement living standards: Osborne's one time chance

George Osborne has a “once in a lifetime opportunity” to create a tax environment to support decent living standards in retirement. That is the view of Fidelity International’s head of retirement Richard Parkin, who called for a sustainable taxation system, ahead of next month’s Budget.There has been much speculation about the outcome of a consultation, launched last summer, into pensions taxation, with a flat rate of relief among the most discussed options.Richard Parkin, head of retirement at Fidelity International, said: “The constant tinkering with tax relief that we have seen since the introduction of the current framework in 2006 has created confusion and undermined confidence in pensions“The government needs to be honest with people about what the State is going to provide in retirement and the importance of making additional provision.“Tax relief reform should focus on providing a framework for that which is supportive and sustainable. We have a long way to go to get contributions to the level they need to be to support decent living standards in retirement. The Chancellor has a once in a lifetime opportunity to create the tax environment that can deliver that.”He said: “Having made great strides in improving pension coverage through automatic enrolment and added flexibility through pension freedom, increasing pension contributions is the last piece of the jigsaw.“There is a huge amount at stake here in economic terms but also in creating a pension system that people can engage with and trust.”His company outlined a five point stress test to judge whether any changes will be effective:1) Is it simple?Research conducted by Fidelity last year showed a very low level of understanding of how pension tax-relief works. Three out of four people scored less than 40% on a test of their understanding of pension tax with 13% of people answering “Don’t Know” to all questions. People with the least saving scored even less.2) Is it inclusive?Fidelity claimed current rules on tax-relief are disadvantageous to both high and low earners.3) Does it keep employers interested?Fidelity research showed that over half of those surveyed would save more if their employer matched their saving. Employers were also trusted much more than government or pension providers.4) Is it sustainable?Any system of incentives needs to be affordable now and in the future.5) Is it deliverable?Fidelity said a rushed implementation of any changes simply increases the risk that they will not be delivered effectively. We have to take time to get this right.

Retirement living standards: Osborne's one time chance

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