- Monday, 21 May 2012
Britain’s failing pension schemes are causing millions to turn to tax-free ISAs. A major report revealed Britain has a “hugely complex failing pension architecture”, which is “unattractive” and confusing.
The institute of Directors’ study says faith in pensions is “dwindling”, with soaring numbers switching to the tax-free individual savings accounts. The latest figures from the Office for national statistics show Britons put £22.9 billion into pension schemes in 2009, down from £24.9 billion in 2008, compared with the £44 billion invested in ISAs.
Malcolm small, from the institute, said: “traditional pensions are now outdated and increasingly unattractive.
“The fact that so many people are either not saving at all for retirement, or moving into other investment vehicles such as ISAs, is a stark illustration that the current architecture has lost public confidence.”
He said the trend of switching from pensions to ISAs is “set to continue or even accelerate.” the government is planning to increase the state pension age to 66 for both men and women in 2020, which will rise again to 67 between 2026 and 2028. The institute is calling for the state pension age to be raised to 70 by 2044.
They claim: “a higher state retirement age will also encourage private saving for those who wish to ‘retire’ earlier.
“We need to stop pretending to people that state or private pension architectures were ever designed to support a potential 30-year retirement from an effective 35-year working life.”
Cash ISAs are capped at £5,640 per year, and the maximum amount that can be invested in a stocks and shares ISA is currently £11,280.
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