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Standard Life calls for flat-rate incentive for UK pensions

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Standard Life is calling on the UK Government to introduce an incentive-led pensions regime rather than one based on the current system of tax relief.

In its response to the Government’s consultation on pensions tax relief, the leading long-term savings and investment company proposes moving to a new flat-rate incentive on employee contributions.
 
Standard Life has put forward a new ‘Incentivised-Exempt-Taxed’ (IET) model – in contrast to the mooted TEE ISA-style regime or the current EET system.
 
A flat-rate incentive of 33.33 per cent – expressed as “you pay GBP3 and the Government pays GBP1” is equivalent to tax relief at 25 per cent under the current regime.
 
Jamie Jenkins, Head of Pensions Strategy at Standard Life, says: “Our proposed flat-rate incentive is the best chance we have of driving the levels of retirement saving needed to ensure that UK consumers are adequately prepared for retirement. This simple and clear single rate incentive system would help engender greater personal responsibility by driving better understanding of, and ultimately engagement with, pension saving.
 
“The financial benefit of paying into a pension becomes much clearer and easier for people to understand. A single rate incentive system offers the opportunity to position the Government contribution like the employer contribution, creating a powerful matching incentive to save. Moving to our proposed model will minimise disruption and will ultimately support the ongoing success of auto enrolment. It can be easily administered through ‘relief at source’ arrangements, which are widely used for workplace pensions today.”
 
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