Think tank calls for savings reform

The UK's savings system must be reformed in the interest of encouraging people to save more money, a report has said.

The Centre for Policy Studies think-tank has shared its views on the current system, calling it 'too complicated' suggesting that it causes many people to be put off saving the money that they will later rely on in retirement.

The report proposes that the pension and Individual Savings Account (ISA) regimes are combined, with an overall contribution limit of £45,000, while also suggesting people be given the option to get at up to 25% of their pension fund before retirement.

Savers should also be allowed to pass on any unused savings to their heirs without being subjected to further tax, the report says.

The think-tank also argues that individuals should not be forced to buy an annuity when they turn 75.

Instead, it suggests that people should be allowed to draw down their assets when required, providing they have at least £50,000 worth of assets in their pension by the time they hit 75.

The centre has also proposed a new tax free system introducing new mini ISAs that offer savers an annual limit of £1,200 in order to encourage under-16s to make savings investments.

The Association of British Insurers has called for a new £50,000 limit to the amount of money that can be paid into a pension each year, saying it would "greatly help simplify the current system of tax relief for pension contributions".

The ABI's director of life and savings - Maggie Craig, agreed with the centre.

"The UK urgently needs to build a better savings culture," she said.

Economists have said that people are not saving enough money during their working lifetimes to provide for retirement.