A leading member of parliament's Work and Pensions Committee has this week come out and said that the pensions system is in need of a shake up with pensions tax relief being more targeted towards younger people, particularly those on low wages.
Currently, the system is somewhat unfair according to some, with pensions tax relief being awarded at the same rate a person pays income tax, which means that the highest earners are getting the lion's share of pensions tax relief. The issue caused Labour's Steven McCabe to speak out at this week's Labour Party Conference in the city of Liverpool.
"The crucial thing is … to get people under 25 building pension pots"
"I think it would be much better to target tax relief on younger people on low incomes so that they start building a pot at a very early age [and] they are really incentivised to do that," said Mr McCabe, who was speaking at the Labour Party conference in Liverpool.
"The crucial thing is … to get people under 25 building pension pots. The only way that is going to happen is if the state incentives them to do it. At the moment, people who are on pretty good pension pots are getting further incentives to get a better one."
Although Steven McCabe's views are not official Labour Party policy at the moment, it could suggest that the party are broadening their previous position which was that the current pensions system targets the wrong income group with tax incentives, with basic rate taxpayers receiving the least.
"I think the age factor is as important as the income factor, it's not just a case of give [tax relief] to the low paid. It's give it to the young on low wages" he said.
The Lifetime ISA
Mr McCabe also spoke out against the former Chancellor George Osborne's introduction of the Lifetime ISA which he said could end up severely harming the levels of pension saving.
"I am deeply sceptical about it because it isn't a pension product and I think the danger is people will think it is, in the same way people are also seeing property in that sense," he said.