George Osborne: I wish I'd been brave enough to turn pensions into Isas

Telegraph

25-03-2025

George Osborne wanted to turn pensions into Isas when he was chancellor but got 'scared off' by his Conservative colleagues, he has revealed.
Speaking on his Political Currency podcast, which he hosts with Ed Balls, Mr Osborne said he explored plans to scrap upfront tax relief on pensions in favour of making withdrawals tax-free, in a similar way to how Isas operate.
Mr Osborne attracted criticism before the 2016 Budget for the rumoured proposals, with experts warning it would affect people's motivation to save for retirement.
Reflecting on his time in No 11, however, Mr Osborne said he wished he'd been brave enough to make the change and 'radically simplify' pension saving.
Mr Osborne became chancellor in 2010 and is well-known for implementing the 'pension freedoms', which were announced without warning in the 2014 Budget. The reforms offered people more choice over how to access their pensions and removed the requirement to purchase a guaranteed income for life, known as an annuity.
Responding to a podcast listener's question, he has now confirmed that he wanted to go one step further by reversing the existing system of providing tax relief on pension savings and charging it on withdrawals.
Mr Osbourne said: 'One of the Budgets I'm proudest of, of the eight I gave, was the one in 2014 where, out of the blue, we unveiled this radical reform of pensions and said that people didn't have to buy annuities and it completely changed the savings landscape.
'But there was actually another big change I wanted to make in a subsequent Budget, which I got essentially scared off.
'I thought you could turn almost all pensions into Isas. So yes, you save out of your taxed income, but the money that comes out of the pension is tax-free, i.e. it can accumulate over your life if you invest in the stock market as people generally should over a long period, you could really benefit from it.'
He went on to explain why he'd moved away from the idea.
He said: 'I know [subsequent chancellors] all looked at it and none of them were brave enough to do it, and I wish I'd been brave enough to do it.
'My big mistake was unlike the annuity reform, which came out of the blue, I trailed this a bit and I kind of consulted with the industry, and all the forces of Conservatives and in the industry were like, 'we don't want to do this'.'
Mr Osborne also admitted that the move would have boosted the Treasury's revenue during his tenure, but insisted that was not his motivation.
He said: 'The really big fiscal wheeze is that essentially you're bringing forward the tax that you would have collected in 40, 50, 60 years' time to now. Instead of people saving tax-free into pensions, they'd have to pay tax on those savings, but the Treasury would lose money in 40 to 50 years' time.
'It would all even out over a long period in our lifetime. But while I was chancellor it would certainly bring in quite a lot of money, but genuinely that was not the reason for doing it, although people suspected that was a motive. I just thought it was a radical simplification.'
During the same episode, his co-host, Mr Balls, a former shadow chancellor, said he would make changes to auto-enrolment if he were still in office.
Currently, workers aged between 22 and state pension age and earning at least £10,000 must be automatically enroled into a pension. Workers pay at least 5pc, with employers adding a minimum of 3pc.
However, Mr Balls said the contribution rate needed to increase and that the system should be extended to younger people and the self-employed.
He added: 'When you've got a reform which is working, do more of it.'
Labour is currently midway through the first of its two-stage pensions review.
The second stage was expected to examine automatic enrolment amid concerns people aren't saving enough for retirement, but it has since been indefinitely delayed.
The Government has still .