Tax breaks ‘will not solve’ pensions crisis

Increasing tax incentives for individuals and companies will not help solve the UK’s pension crisis, the Trade Union Congress has warned.

The TUC said that increasing tax incentives would increase inequalities by providing extra help for the rich, instead of the poor.

At present, the union, said the total cost of tax incentives per year is estimated at £27 billion, with half going to upper rate taxpayers.

A report by the TUC argued that incentives “simply switch cash from other savings vehicles”. It also warned that even occupational pension schemes, where employee contributions usually trigger a much bigger employer contribution, attracted only 13% of full-time employees and 16% of part-timers.

The report said that the government needed to compel both employers and employees to pay into a pension scheme, because “voluntarism – even with the current high level of incentives –has failed”.

TUC General Secretary, Brendan Barber, said: “New pensions incentives will be expensive, won’t work and will increase inequality.

“We already have huge incentives to save for retirement, but they are not working. Instead of the further help for the better off that new incentives would provide, the government should phase in compulsory savings for employers.

“And without the need for incentives, ministers should take a close look at whether sending quite so much on helping the well-off have comfortable retirements is fair and prudent. A better state pension would give everyone a firm foundation on which to build a pension.”

(KMcA/GB)