A shift from an ‘EET' to a ‘TEE' tax system could save the government £10bn a year, experts estimate.
In a briefing note published by the Centre for Policy Studies on Friday (3 July), Michael Johnson urged the government to switch from the current pensions tax system, where contributions and investment income are exempt from tax and only the benefits are taxed (EET), to a new system where contributions are taxable but investment income and benefits are exempt (TEE).
This comes as the government launched a consultation to look at whether there is a case for reforming pensions tax relief.
Johnson said that replacing current support for occupational pensions with a Workplace ISA would both radically simplify the UK savings landscape and could help the government make a reduction in the deficit of up to £10bn a year.
The Centre for Policy Studies said it would shortly publish an exploratory paper looking at how a Workplace ISA could replace occupational pension provision following complementary proposals made in 2014 for a Lifetime ISA, to replace private pension provision.
Johnson said the introduction of these two ISAs and the ISA Pension would "make manifest a purely TEE savings world, eliminating the need for pension products' EET framework. This would mark a radical simplification of the savings landscape, which would be widely welcomed by many consumers."
Johnson has long been a critic of the current pensions system and has argued the pension freedoms coupled with generation Y's complete disengagement from traditional retirement saving has effectively killed pensions in their current form.
He has also said the current "regressive" tax relief system does very little to encourage a savings culture and should be radically altered.
Johnson has also been a huge critic of "intergenerational injustice" caused by politicians racking up unfunded promised and fawning over older voters, noting that Generation Y - those born between 1980 and 2000 - would foot the bill for the benefits that would be enjoyed by the baby boomers born between 1945 and 1960.
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