Simplification is the key - Centre for Policy Studies

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ACKNOWLEDGEMENTS This paper was catalysed by Lord Blackwell’s “lifetime savings” vision to encourage more people to save more for the long term. Subsequently, Carol Bell, John Lawson (Standard Life), Kevin Wesbroom (Hewitt Associates) and Mark Younger have made significant contributions to the intellectual pie. The credibility of papers such as this relies on technical accuracy, and the author is particularly indebted to John Lawson, Brian Wilson and Peter Williams (Hewitt Associates) and Skandia’s Michelle Cracknell. Valuable insights (and data) have been gleaned from many others who have generously given the author some of their time but, to be clear, this does not mean that they have endorsed the proposals; the views expressed in this paper are solely the author’s. They include: Dr Yvonne Braun, Paul Clark, Mark Edwards & Ben Stafford (ABI), Nick Hurman, Adam Potter, John Quinlivan & Rachel Vahey (Aegon), Ronan Kearney (Allium Capital), Jon Moulton (Better Capital), Prof Peter Sinclair (Birmingham University), Con Keating (BrightonRock), Mark Hoban MP, Rt Hon Theresa May MP & Nigel Waterson MP (Conservative Party), Simon Hanson & Robert Laslett (DWP), Gary Shaughnessy (Fidelity), Trevor Matthews (Friends Provident), Jim Tindale (Hewitt Associates), Carly Gray & Damian Pritchard (HMRC), Mike Keohane & Ben Pearce (HM Treasury), John Woodhams (HSBC), David Freedman, Douglas Anderson, Virginia Burke, John Dickson, Peter Dyer, James Entwisle, Clive Fortes, Debbie Falvey, Nick Flint, Brian Nimmo & Chris Noon (Hymans), Malcolm Small, Corin Taylor & Miles Templeman (IoD), Hugh Ferrand, Monique Stephens, Ian Trevers & Rick White (Invesco Perpetual), Baroness Hollis (Labour Party), Adrian Boulding & John Godfrey (Legal & General), Dr Vince Cable MP, Steve Webb MP & Katie Waring (Liberal Democrats), Ramsay Adams & Steve Williams (Mastek), Catherine Mancusi & James Walsh (NAPF), Andrew Slater (ORTEC Finance), Tim Jones, Helen Dean, Dirk Patterson & David Barnes (PADA), John Coomber (Pension Corporation), Robin Ellison (Pinsent Masons), Niki Cleal & Chris Curry (PPI), Larry Zimpleman (Principal Financial), Tom Boardman, Tim Fassam, John Glendinning, Trevor Gosney, Helen McCarthy & Giles Wade (Prudential), Laurie Edmans (SHIP), Michelle Cracknell (Skandia), Ken Davy, Neil Stevens & Matt Timmins (Simply Biz), Howard Davies & Greg Thorley (Standard Life), Ian Price (St James Place), John Moret (Suffolk Life), Nigel Stanley (TUC), Tim Webb (TW Consulting) and Mark Duke (Towers Watson). 77
The modelling The author would like to express his sincere thanks to Hewitt Associates for all their modelling work. Brian Wilson, assisted by Peter Williams, put many hours, voluntarily, into the project, along with many valuable comments on the text. Standard Life The author would like to express his appreciation to Standard Life for their kind sponsorship of this paper. 78
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Simplification is the key Stimulati
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THE AUTHOR Michael Johnson trained
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A note concerning data Finding a co
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These proposals depend upon having
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SUMMARY The UK’s long-term savin
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any annuitisation requirement, prov
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Thus, had pension savings products
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INTRODUCTION There has been a flood
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PART ONE: THE LONG-TERM SAVINGS LAN
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Japan’s savings ratio was once th
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scheme contribution rates are lower
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Table 1: Funded pension scheme asse
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1.9 The international perspective A
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Table 4: ISA savers’ income distr
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Table 6: The complexity of the tax
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Figure 4: Income options upon retir
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savings by delivering a framework t
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Figure 7: When non-savers might sta
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There are other aspects to consider
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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
Page 54 and 55: Whilst the UK’s NRR for the mean
Page 56 and 57: Currently, reducing pensioner pover
Page 58 and 59: Table 13: Net cost of tax relief un
Page 60 and 61: TEE would be hugely attractive to p
Page 62 and 63: 5.6 Tax treatment: international pe
Page 64 and 65: PART II THE PROPOSALS AND THEIR IMP
Page 66 and 67: Proposal 6: post-retirement, amend
Page 68 and 69: 7. TAX SIMPLIFICATION: SOME OPTIONS
Page 70 and 71: 8. THE IMPLICATIONS FOR SAVERS Impl
Page 72 and 73: The higher rate taxpayers’ perspe
Page 74 and 75: segregated from any employer-sponso
Page 76 and 77: epresent a further step down the pa
Page 78 and 79: 10. THE IMPLICATIONS FOR THE PENSIO
Page 80 and 81: Such principles would have to ensur
Page 82 and 83: Figure 13: The cost of pension savi
Page 84 and 85: pool of underlying pension assets (
Page 86 and 87: hardship” facility, whereby cash
Page 88 and 89: occupational pension scheme benefit
Page 90 and 91: CONCLUSION We would save more, for
Page 94 and 95: APPENDIX I Summary of proposals fro
Page 96 and 97: APPENDIX II Value of assets in priv
Page 98 and 99: depending upon age at the time that
Page 100 and 101: APPENDIX V PRE-RETIREMENT ACCESS TO
Page 102 and 103: APPENDIX VII FINANCIAL PLANNING TOO
Page 104 and 105: APPENDIX VIII THE MODEL 173 The
Page 106 and 107: GLOSSARY Alternatively Secured Pens
Page 108 and 109: pensions and earnings, but excludes
Page 110 and 111: those with earnings above £4,940 b
Page 112 and 113: in cash terms, i.e. fixed at £770
Page 114: The UK savings industry is barely t
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