OREANDA-NEWS. Aon Hewitt, the global talent, retirement and health solutions business of Aon plc (NYSE:AON), has commented on the Government’s new Green Paper, ‘Strengthening the incentive to save; a consultation on pensions tax relief”, announced in the Summer Budget.

Kevin Wesbroom, senior partner at Aon Hewitt, said:
“This would appear to be a genuine consultation on whether the pension tax system needs to change, rather than how the system should be changed. But we cannot ignore the influence of the fiscal imperative to get a suitable outcome in terms of tax revenue.
“There is a big link made between tax incentives and personal responsibility – but this fails to recognise the centrality of the role of the employer in retirement savings – and their role needs to remain central if we are to see realistic levels of retirement savings in the future.”

Kevin Wesbroom continued:
“The principles guiding reform are sound – simplicity, transparency, personal responsibility and sustainability are difficult to argue with. But, as ever, the real issues are less obvious. These principles could have been applied to the last major changes, those of Pension A-Day in 2006. But it didn't take long for Pension Simplification to become Complexification, as successive measures were added, reliefs restricted or removed and the administrative burden escalated out of control.”

Kevin Wesbroom said:
“One of the consultation questions is whether greater engagement in pensions savings can be increased by a simpler system. We would support making the tax relief more explicit and simpler to understand for individuals; a variation of Buy One, Get One Free - where the tax relief is converted to an explicit addition to the pension pot - has a high intuitive appeal. But the price to be paid is a switch to ISA-style taxation – which gives the tax relief up and then makes the pension exempt.

“This switches the tax timing for a generation, and would have huge appeal to the Treasury. Individuals may have less confidence in trusting future governments to honour promises on maintaining the tax free nature of pension pay-outs.”

About Aon

Aon plc (NYSE:AON) is a leading global provider of risk management, insurance brokerage and
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