On April 6th 2006, the pensions system will undergo its most radical shake up in half a century when the complex set of taxation laws will be simplified in a move that it is hoped will encourage more people to save for their retirement.

The report claims the new legislation, which reduces the number of taxation laws from eight to one, will have little impact on the majority of savers, while only opening opportunities for wealthy individuals.

“A-Day does not address the problem of lack of demand for pensions in the market,” says Annabel Gorringe, financial service analyst at Datamonitor.

“[The changes] will increase the opportunities for tax-free investment in pensions to the wealthiest individuals at a time when the government has so far failed to boost pensions saving in the majority of the population,” Ms Gorringe added.

Datamonitor is supporting the proposal in Lord Turner’s report to introduce a National Pensions Saving Scheme (NPSS), a ‘soft compulsion’ scheme to be provided by employers.

Employees will be automatically enrolled on the NPSS but will have an opt-out clause if they wish. Opposition to the proposal has been rife from a variety of interest groups but Datamonitor claims such “far reaching decisions” are necessary to prevent more serious problems in the future.

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