Pensions tax incentives 'too low'

Incentives aimed at making people invest in pension funds are currently too low, with Isas often the more attractive option for savers, the independent financial advice service EveryInvestor has claimed.

According to the website, investors are also being deterred from pension funds due to the current state of restrictions imposed on access to capital, with the present system increasingly less-suited to the needs of individuals.

While all income for a stakeholder pension is subject to taxation, income is permanently tax-free with an individual savings account, while an Isa also imposes no restrictions on access to capital or hinders access to post-retirement benefits.

Chris Gilchrist, EveryInvestor's editor-in-chief, said: "The now permanent status of the Isa tax exemptions ought to encourage more people to save more in this form rather than in pension plans.

He added that, while Personal Accounts may have some success in enforcing savings on the lower-paid, "for middle earners, the pension plan negatives outweigh the positives and leave the Isa the clear winner for long-term savings."

With the end of the present tax-year imminent, consumers are being advised to reassess their financial situation and, in particular, their rate of pension contributions.