Laura Suter, personal finance analyst at AJ Bell:
“The Committee’s report is wide ranging with a smorgasbord of suggestions and proposals that emphasise just how complex the long-term savings market has become in the UK.
“Complexity is the enemy of engagement, so the Committee is right to highlight measures to simplify things for consumers and help them manage their finances. However, the report looks at lots of different areas in isolation and arguably more could be achieved by an overarching piece of work that looks at the long term savings market as a whole and areas where it can be simplified to benefit consumers.
Lifetime ISA
“For example, the Lifetime ISA has introduced complexity but there is a danger that scrapping it 18 months after introducing it, just as the product is becoming established, would further dent consumer confidence in the savings market. Such a drastic move should be considered within the context of wider changes that could help savers.
Pension tax relief
“Scrapping the Lifetime Allowance for pensions and controlling tax relief through the Annual Allowance would be a welcome development and stop people worrying about good investment returns resulting in a tax hit.
“If a flat rate of tax relief encouraged more pension savings it would be a positive outcome, but the report also concludes that tax relief does not work as an effective incentive to saving, so it’s hard to see how it would make a significant difference. Before such a radical overhaul to the system we would want to see evidence that it would achieve the goal of getting more people saving for their retirement.
Gender pension gap
“We’re pleased that the report in particular recommends addressing the gender pension gap, with more women under-saving for their pension than men. Government figures show that men in the 55-64 age bracket have more than double the pension pot of women of the same age*, drastically affecting their income in retirement. Any work the Government can do to further understand the reasons behind this gap - and work to close it - should be encouraged.
Cash sidecar
“The report also considers expanding the ‘cash sidecar’ proposal currently being trialled by Nest, to allow people early access to a portion of their pension fund.
“We’re interested to see the outcome of the trial, but are concerned that the details of how these ‘sidecars’ could work and the instances when you can access them could become horrendously complicated. Instead, an education programme encouraging individuals to keep some of their long-term savings outside of their pension and in cash could be more beneficial.
Government resources
“With all of these proposals there is a concern that the Government, during the complicated Brexit negotiations, does not have the ability to spend the time on some of these changes that they require. While many of the proposals in the report are sensible and would help savers to engage with their money, the most damaging thing would be for ill-thought-out policy to be rushed through by a time-strapped Government.”
*Based on ONS figures, men aged 55-64 between July 2014 and June 2016 have £237,100 in their pension pot, compared to £141,600 for a woman of the same age.