Friends Life urges government to change laws to boost pension

Friends Life has urged the government to amend legislation

Friends Life has urged the government to amend legislation

Friends Life has urged the government to amend legislations on in-specie contributions to boost pension savings.

The current HMRC rules only allow certain in-specie contributions to be transferred into a SIPP, thus acting as a deterrent for pensions savings, the firm said.

Relaxing the current norms will also encourage employees to transfer benefits such as share incentives plans to tax wrappers and boost pension savings.

“Removing some of the strict criteria around in-specie contributions outside of maturing sharesave arrangements into a pension would be a simple, yet profoundly important, step towards realising the government’s ambition to ignite long-term savings”, said Daniel Hawkins, corporate platform product manager at Friends Life Group.

“The industry-accepted solution of creating an irrevocable debt, then receiving settlement of that debt in shares or units is cumbersome, costly and difficult to administer for all concerned”, he added.

Better utilization of platforms will also help sort out administrative bottlenecks and reduce costs, said Mr. Hawkins.

“Platforms are more than the sum of its parts; to maximise their potential the range of benefits should be allowed to work together as much as possible. For example, moving maturing share holdings into an ISA, and later a pension, not only has tax advantages but also allows benefits to pass fluidly from one product to another in a way that encourages long-term saving”, he added.

“Reviewing the legislation to make it possible for individuals to make direct contributions to a pension, in the form of investments in addition to cash, should be the first step in bringing this ambition to life”, he argued.

Agreeing with Mr. Hawkins, Graeme Mitchell of Lowland Financial, said: “Anything that encourages people to invest and save in the future has to be a good thing. I am not sure what else you would do.

Detailing the benefits of reforms, he added “If you hold stocks and shares you can already transfer this. In-specie becomes more and more tricky as the value of the asset increases. If there is a limit in terms of how much you can pay in, then the transfer will not work as you cannot get tax relief on it. There is also a question over how many people have employee share options, and these come with tax breaks anyway.

“Instinctively, if you have a platform there are clear administrative and cost savings by having everything in one place, but I do not think there are more platform-based benefits out there that cannot already be used”, he concluded.

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