The U.K.’s “outdated” regulations on pensions are driving Britons away from using them to save for retirement, the Institute of Directors said.
While annual investment in pensions fell 11 percent to 22.9 billion pounds ($37 billion) between 2007 and 2009, contributions to tax-exempt Individual Savings Accounts had increased to almost 54 billion pounds by April 2011, Malcolm Small, senior adviser at the London-based business lobby, said in a report today.
The report includes a call to increase the state retirement age to 68 by 2032 instead of 2046 and to 70 in 2044. Chancellor of the Exchequer George Osborne said last month he’ll simplify the tax system for pensioners and introduce a single-tier pension for future retirees above the level of the means test.
The shift to ISAs is “a stark illustration that the current architecture has lost public confidence,” Small said in the statement. “A simpler system, a higher state-retirement age and a proper savings policy would at least provide the foundations for a new retirement savings architecture.”
Investment in pensions has fallen from a peak of 25.6 billion pounds in 2007, according to the IoD. Contributions to ISAs climbed to 53.8 billion pounds in the 2010-11 tax year from 35.7 billion pounds in 2007.
Insurance firms Capita Hartshead and Lucida also contributed to the report.