UK - The Conservative Party has claimed it will abolish compulsory annuitisation at age 75 if they win the next general election, as part of an effort to "rebuild our savings culture".
In a keynote speech at the Association of British Insurers' (ABI) Biennial Conference, George Osborne, Conservative shadow chancellor of the Exchequer, told delegates that encouraging saving through the tax system "will be a central task for the next Conservative government".
He suggested the savings culture in the UK had been damaged partly by the widespread belief that rising house prices would pay for retirement, but also through "persistent attacks on our savings and pensions industry through the tax system and new regulations".
Osborne claimed "U-turns" on issues such as alternatively secured pensions (ASP) - income drawdown after the age of 75 - and the recent Budget announcement on the restriction of higher rate tax relief "are only the most recent examples of the instability that has persistently undermined confidence in the certainty of the tax system over the last 12 years".
The shadow chancellor stated if the Conservatives come to power they will adopt key proposals on reforming the way tax law is made, and reduce uncertainty with regard to savings through measures including the "abolition of basic rate tax on savings income".
In addition, Osborne also confirmed the Tory Party plans to "abolish compulsory annuitisation at 75, conditional on having sufficient income in retirement to avoid means-tested benefits", as once a person gets to age 75 they have to take an annuity or ASP, although the drawdown option can trigger certain tax penalties.
Additional proposals on the issue will be published in "due course", but he said that as the savings and pensions industry needs to "play its part" by providing transparent, reliable and competitive products, while another of his aims would be to "make sure we have a regulatory system that allows you to do that".
Osborne claimed the introduction of personal accounts, scheduled to be 'soft launched' in 2011, "is the biggest immediate challenge in this area" and further added: "It would be a disaster if Personal Accounts were to end up undermining saving even further instead of encouraging it". (See earlier IPE article: Personal accounts to 'soft launch' in 2011)
He argued: "We have made it very clear that we have grave concerns about the potential for mis-selling to people who risk losing means-tested benefits by saving, the operating costs of the new system - which the government now admits will be much higher than originally claimed - and the risk of employers ‘levelling down' the generosity of their pension provision."
Elsewhere within his speech, Osborne also highlighted the importance of institutional investors in changing remuneration structures and said there should be incentives to improve corporate governance and build a "new culture of long-term investment".
He added: "I welcome the signs that institutional investors are becoming more assertive in holding management to account, particularly when it comes to remuneration. But there is still much further to go."
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