The Treasury Select Committee has today published the Government’s response to its Household Finances Report.
Among other things, the report hints that pension tax relief will not undergo fundamental reform in the near future and rejects calls for the Lifetime ISA to be scrapped.
Tom Selby, senior analyst at AJ Bell, comments:
“Ripping the roots from the pension tax system just as automatic enrolment is bedding in would have been a monumental gamble by Spreadsheet Phil.
“Fundamental reform as some have suggested – such as introducing a flat-rate of tax relief – would hit right into Conservative heartlands and risk causing a rebellion among backbench MPs already riled by the Brexit negotiations.
“More importantly, it would risk the fragile savings culture being nurtured in the UK through automatic enrolment. Lack of saving remains arguably the biggest challenge facing society today, so anything that could potentially damage this needs to be avoided at all costs. The pragmatic approach being taken by the Government therefore feels like the right one at this time.
“The Government is also right to knock back calls for the Lifetime ISA to be scrapped altogether. Criticisms of the new savings vehicle didn’t appear to be based on any hard evidence. In fact, the LISA has proven popular among younger savers and ditching it now – just as it gains traction in the UK – would have been a retrograde step.”
