Simplification is the key - Centre for Policy Studies

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Simplification is the key Stimulating and unlocking long-term saving MICHAEL JOHNSON
THE AUTHOR Michael Johnson trained with JP Morgan in New York and, after 21 years in investment banking, joined Tillinghast, the actuarial consultants. More recently he was Secretary to the Conservative Party’s Economic Competitiveness Policy Group. He is the author of a sister paper, Don’t let this crisis go to waste: a simple and affordable way of increasing retirement income, Centre for Policy Studies, September 2009. The aim of the Centre for Policy Studies is to develop and promote policies that provide freedom and encouragement for individuals to pursue the aspirations they have for themselves and their families, within the security and obligations of a stable and law-abiding nation. The views expressed in our publications are, however, the sole responsibility of the authors. Contributions are chosen for their value in informing public debate and should not be taken as representing a corporate view of the CPS or of its Directors. The CPS values its independence and does not carry on activities with the intention of affecting public support for any registered political party or for candidates at election, or to influence voters in a referendum. ISBN No 978-1-906996-24-6 © Centre for Policy Studies, June 2010 57 Tufton Street, London SW1P 3QA Printed by 4-Print, 138 Molesey Avenue, Surrey
Page 1: Simplification is the key Stimulati
Page 5 and 6: A note concerning data Finding a co
Page 7 and 8: These proposals depend upon having
Page 9 and 10: SUMMARY The UK’s long-term savin
Page 11 and 12: any annuitisation requirement, prov
Page 13 and 14: Thus, had pension savings products
Page 16 and 17: INTRODUCTION There has been a flood
Page 18 and 19: PART ONE: THE LONG-TERM SAVINGS LAN
Page 20 and 21: Japan’s savings ratio was once th
Page 22 and 23: scheme contribution rates are lower
Page 24 and 25: Table 1: Funded pension scheme asse
Page 26 and 27: 1.9 The international perspective A
Page 28 and 29: Table 4: ISA savers’ income distr
Page 30 and 31: Table 6: The complexity of the tax
Page 32 and 33: Figure 4: Income options upon retir
Page 34 and 35: savings by delivering a framework t
Page 36 and 37: Figure 7: When non-savers might sta
Page 38 and 39: There are other aspects to consider
Page 40 and 41: 3. THE EMPLOYERS’ PERSPECTIVE 3.1
Page 42 and 43: When employees with DC funds retire
Page 44 and 45: More specifically, employers are no
Page 46 and 47: Both businesses do have important c
Page 48 and 49: year. 91 Clearly, there are conside
Page 50 and 51: elderly and the wealthy, not least
Page 52 and 53:
5. THE TREASURY’S PERSPECTIVE 5.1
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Whilst the UK’s NRR for the mean
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Currently, reducing pensioner pover
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Table 13: Net cost of tax relief un
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TEE would be hugely attractive to p
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5.6 Tax treatment: international pe
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PART II THE PROPOSALS AND THEIR IMP
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Proposal 6: post-retirement, amend
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7. TAX SIMPLIFICATION: SOME OPTIONS
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8. THE IMPLICATIONS FOR SAVERS Impl
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The higher rate taxpayers’ perspe
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segregated from any employer-sponso
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epresent a further step down the pa
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10. THE IMPLICATIONS FOR THE PENSIO
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Such principles would have to ensur
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Figure 13: The cost of pension savi
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pool of underlying pension assets (
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hardship” facility, whereby cash
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occupational pension scheme benefit
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CONCLUSION We would save more, for
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ACKNOWLEDGEMENTS This paper was cat
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APPENDIX I Summary of proposals fro
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APPENDIX II Value of assets in priv
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depending upon age at the time that
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APPENDIX V PRE-RETIREMENT ACCESS TO
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APPENDIX VII FINANCIAL PLANNING TOO
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APPENDIX VIII THE MODEL 173 The
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GLOSSARY Alternatively Secured Pens
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pensions and earnings, but excludes
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those with earnings above £4,940 b
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in cash terms, i.e. fixed at £770
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The UK savings industry is barely t
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