Policies such as capping pension salary sacrifice schemes<\/a> and slashing the tax-free limit for cash Individual Savings Accounts (ISAs)<\/a> will worsen the issue of Britons \u201cunder-saving\u201d for their retirement, the Chancellor has been told.<\/p>\n Income tax on savings is also set to rise by 2 per cent after the Budget<\/a>.<\/p>\n Concerns about threadbare private pension pots have been heightened because of the pressure on the state system, with some economists arguing that the triple lock<\/a> should be scrapped and the retirement age increased to keep costs under control.<\/p>\n New FeatureIn ShortQuick Stories. Same trusted journalism.<\/p>\n A faster or further increase to the state pension age<\/a> could pile more pressure on workers to save more money into their private pots if they wish to finish stop working sooner.<\/p>\n But \u201canti-saving\u201d policies in the Budget have raised concerns that workers could be put off, leaving them with a shortfall in retirement.<\/p>\n The Government could argue that it has plans to boost retirement savings by thousands of pounds by forcing pension funds to combine their assets into larger megafunds.<\/a><\/p>\n Risks of under-saving for retirement<\/p>\n Edward Jones, professor of economics at Bangor University, said: \u201cIt [Budget] did have that signal of being anti-saving. It\u2019s already tricky enough to get people to save for retirement, especially if they\u2019re under 35, given it\u2019s so far away. If government sends a message that we\u2019ll penalise that, it\u2019s not a great space to be in.<\/p>\n \u201cLong term that could put more pressure on the state to help people in their retirements, but this government doesn\u2019t worry about that as they won\u2019t be here\u2026 It kicks the can far down the road but when it does occur it\u2019ll be a big crisis.<\/p>\n \u201cAs well as the salary sacrifice measure, the narrative comes out against saving generally. We could really do with people saving more.\u201d<\/p>\n Professor Jones cautioned that more people may have to wait longer to retire as a result of the Budget: \u201cThat is likely to happen\u2026 People may find themselves working for longer because their savings aren\u2019t sufficient to cover expenses.\u201d<\/p>\n Last month, the Chancellor announced that from 2029 there will be an annual cap of \u00a32,000 on the amount which workers can sacrifice into pensions without incurring national insurance (NI) payments. The change is expected to raise \u00a37.3bn over five years \u2013 and will cost those using the schemes an average of \u00a384 a year.<\/p>\n At the same time, the Chancellor reduced the amount which can be saved tax-free in cash ISAs from \u00a320,000 to \u00a312,000 a year for under-65s, with the change due to come into effect in April 2027. They can place a further \u00a38,000 into a stocks and shares ISA. Income tax on savings will also increase by 2 per cent from 2027.<\/p>\n Spiralling cost of state pension<\/p>\n The concerns about people under-saving into private pensions coincide with rising worry about the sustainability of the state pension<\/a> bill.<\/p>\n In the summer, the Office for Budget Responsibility said that the triple lock \u2013 which ensures the state pension rises in line with whichever is highest of inflation, wage increases or 2.5 per cent \u2013 will be three times more expensive<\/a> by the end of the decade than it was expected to be when it was introduced in 2011, costing \u00a315.5bn by 2030.<\/p>\n The ballooning cost has led to calls for the triple lock to be scrapped, or for the state pension age to rise more quickly or higher than currently planned to keep costs down.<\/p>\n A Labour MP told The i Paper that there was a pressing need for the Pensions Committee to \u201cproperly look at the future sustainability of state pensions, including the triple lock\u201d. <\/p>\n At the same time, the Department for Work and Pensions (DWP) has previously warned that a significant portion of the working-age population is not saving enough into their retirement fund.<\/p>\n 3.3 million affected by salary sacrifice policy<\/p>\n According to an impact assessment of the salary sacrifice policy carried out by HMRC, 3.3 million people \u2013 or 44 per cent of employees currently using salary sacrifice \u2013 would be affected by the \u00a32,000 cap.<\/p>\n
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