Manifesto calls on MPs from all major political parties to cut savings gap by building on tax breaks and changing pensions contributions cap
Fidelity International is calling on political parties to address inadequacies in the savings industry with a manifesto promoting more incentives for savers, including an annual Isa bonus.
Its manifesto Improving Incentives for Medium- and Long-term Savings sets out plans to correct what it sees as an “inadequate” savings system by introducing an annual Isa bonus, an annual cap on pension contributions and incentivising Isa to pension transfers.
“UK household savings is inadequate,” the paper says.
“This is so when considered against both historic levels and the level required to support increased life expectancy in retirement.”
The fund house is lobbying MPs across the political spectrum to cut the savings gap by building on current tax breaks and other incentives designed to encourage saving.
According to Fidelity, Isas are perceived to lack any incentive to save, especially for basic-rate taxpayers. The manifesto therefore proposes an annual bonus paid on investment and each subsequent anniversary. This, it says, will encourage young people to save and spread the cost to the Government over many years.
It is also lobbying for an annual cap on pension contributions – suggesting £50,000 – which would attract tax relief at a saver’s highest marginal rate.
This, Fidelity says, would be a more transparent system than current proposals for
high earners announced in the 2009 budget.
The manifesto describes plans to taper relief for incomes of £150,000, as “poorly developed, too regressive in nature and damaging to overall levels of pension savings.”
Another key proposal is incentivising transfers from Isa savings to pensions in excess of the annual cap on pension contributions.
“In effect, investors would be given a financial incentive to transfer their accumulated unlocked savings into a locked pension pot,” says Fidelity.
Lastly, the paper proposes an update on annuity rules and the introduction of an index-linked threshold, above which annuitisation of pension pots would no longer be compulsory.
In addition, it calls for the roll out of auto-enrolment “without delay”.
The manifesto comes at a time when the issue of savings comes under the political spotlight.
Earlier this month, shadow chancellor George Osborne mapped out plans to put the restoration of a savings culture at the heart of a future Tory government’s economic policy.
