To build on the introduction of auto-enrolment next year, MetLife has urged the government to launch a mini-pension account offering savers concessions such as 40 percent tax relief and early access to funds.
The automatic enrolment process, due to begin in October 2012, is expected to encourage employees to start, or increase retirement savings. The government has put the employees figure between 5 million and 9 million.
MetLife bosses however, suggested supplementary accounts, modeled on the successful ISAs, called mini-pensions, arguing further incentives will drive people to increase retirement savings and would help the government and regulators build on the introduction of auto-enrolment.
MetLife proposed savers be allowed to contribute £5,000 every year into the auto-enrolment scheme with 40 percent tax-relief and access to 25 percent of the fund every five years.
“The mini-pension is intended to build on the introduction of auto-enrolment by offering more incentives for extra saving,” Peter Carter, product marketing director of MetLife UK.
“It is aimed at engaging individuals to plan actively for their retirement and to save more than the minimum,” he added.
The provider suggested the proposed plan be funded by reducing current annual allowances of £50,000 and cutting down the relief offered to top rate tax payers to 40 percent than the current 50 percent.
“Auto-enrolment will galvanise retirement saving but the minimum eventual contributions of up to 8 per cent will not be sufficient to meet retirement income expectations,” said Mr. Carter.
“Our proposal complements the government’s drive to improve savings and financial planning, and allowing limited access to savings will enable people to get into the habit of saving for retirement,” he added.