Businesses have raised concerns over the possible changes to pension tax relief announced in Summer Budget 2015 in a survey released by Aviva.
The survey of 118 businesses revealed that 67% think that the introduction of an ISA style system where both employee and employer contributions would be subject to tax, would lead to a decrease in the amount being saved by workers.
Chancellor George Osborne, outlining the basic idea being considered during his Summer Budget 2015 speech, said:
“You pay in from taxed income – and its tax free when you take it out. And in-between it receives a top-up from the government.”
The survey also found that:
- less than 10% of respondents thought an ISA system would increase employee contributions
- 82% thought it was of high importance to keep national insurance contributions (NICs) relief on pension contributions
- 52% said they would lower their pension contributions if the ISA system was introduced alongside an abolition of NICs
- 10% said they would absorb the extra cost and carry on at their current levels.
80% of those surveyed thought employees would save more into their pensions if they government introduced a system whereby it contributed £1 for every £2 saved.
Andy Briggs, CEO of UK & Ireland Life at Aviva, said:
“The clear message from employers is that an ISA-system is likely to reduce pension saving levels, including their own contributions. Employers make around two thirds of all contributions to pensions so how they are incentivised to contribute is very important.”