Pensions are good savings mechanism

Workplace auto-enrolment makes pensions saving more attractive than most other options with comparable returns because employers have to match employees’ contributions says the Institute for Fiscal Studies (IFS).

An IFS report also found that universal credits now being rolled out will create disincentives to have more than £6 000 of savings for the seven million families who claim them. On the other hand those facing withdrawal of credit as their earnings rise will have a big incentive to put money in a pension.

Stuart Adam author of the report said: ‘The past few years have seen radical changes announced to the taxation of savings. These will take millions of people’s savings out of the tax net altogether. Ideally people might make savings decisions based on the underlying risks and returns of different assets. But taxes and charges can significantly change the relative attractiveness of different...