Traditional occupational pensions should be replaced with workplace ISAs, according to the Centre for Policy Studies.

The Workplace ISA and the ISA Pension briefing note published 3 July, urges the government to stop tinkering with pensions and instead undertake bigger reforms.

Research fellow Michael Johnson argues that replacing an occupational pension with a workplace ISA would simplify the UK savings landscape in line with what people want from a savings product. In addition, he argues it would make a reduction of up to £10bn on the deficit.

Last year the CPS published proposals to abolish all income tax and employer national insurance contributions relief on pension contributions, to be replaced by a redistributive 50p incentive per £1 saved, paid irrespective of tax-paying status. 

However, the Conservative Party’s 2015 manifesto instead proposed to reduce tax relief on pension contributions for those earning more than £150,000 a year
reducing it from £40,000 to £10,000 by the time income reaches £210,000.

Johnson believes the prospect of a workplace ISA, operating within the auto-enrolment arena is attractive.

“This could lead to an ISA Pension, a regular income stream derived from the liquidation of Workplace ISA assets. It would be tax-exempt, consistent with ISAs’ TEE tax framework,” he said.

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