Repositioning tax relief as matched contributions from Government would be a cheap and easy way to increase savings in the UK, says Aegon.
The proposal is one of a series of simple and low cost suggestions Aegon is putting to the Government to boost savings.
Aegon’s research found that the “matching” concept of getting £X elsewhere for every £Y you personally put in is a more resonant way of communicating tax benefits.
The company is suggesting that tax relief on pension savings is positioned as Government “matching” in all communications.
Its research also found joining a company pension or share save scheme was spontaneously mentioned as a positive trigger for long-term saving because the employer contribution is normally presented as “matching” and because people trust their employer’s communications on the benefits of saving. It is therefore calling for a much greater focus on encouraging employers to engage with pension provision.
The drive is being headed by Otto Thoresen chief executive of Aegon UK, whose review of generic financial advice called for the establishment of a national money guidance body.
Aegon is calling for the Consumer Financial Education Body (CFEB) to mount a campaign to educate people on the costs, benefits and risks of property investment compared to other asset classes.
It also wants to see the launch of a specific campaign, spanning Government and industry, to increase public awareness and understanding of the tax advantages available for different forms of saving.
Thoresen says: “All commentators agree that the UK faces a chronic level of under-saving and that more needs to be done to help people fund their retirement years. There’s some evidence that the current system has a number of positive basic design elements and can influence behaviour. But it also suggests the current system is too complex, there’s very low awareness of the benefits and current incentives aren’t enough to overcome people’s predilection for investing in property. Our research suggests some simple, low cost measures could build on the positives.
“Phrases like “tax relief” have little or no meaning for people and any mention of the word “tax” can evoke a negative reaction. Our research suggests some simple measures like re-positioning “tax relief” as “matching” could make existing tax incentives more effective. It also shows the importance of education in raising awareness and understanding of the tax advantages of different forms of saving and of the benefits and risks of property as an investment.”