Tax Relief for Pension Saving in the UK
Tax relief is seen as a means to encourage pension saving, which offers a level of incentive that compares favourably with other types of savings. However, there are concerns that this tax relief is expensive, poorly targeted, and does not achieve its policy objectives. Equally, there are concerns that continual changes to pension tax relief could undermine pension saving.
This report considers the role of tax relief against a background of evolution of the UK pensions system. It considers the extent to which tax relief incentivises pension saving and considers some alternatives to the current system, including adjustments to the current system, changes to the tax free lump sum and the use of a single rate of tax relief.
This research has been sponsored by Age UK, the Institute and Faculty of Actuaries, Partnership and the Trades Union Congress. The PPI would like to thank the sponsors for their input and support throughout the project. Sponsorship has been given to help fund the research and does not imply agreement with, or support for, the analysis or findings from the project.
Chapter one considers the rationale for tax relief and provides an overview of the current system of tax relief on pensions and the cost of the current system. It also considers who benefits most from tax relief.
Chapter two examines the extent to which tax relief incentivises pension saving.
Chapter three goes on to consider some alternatives to the current system, and examines the implications of recent adjustments to the current framework of tax relief.
Chapter four considers changes to the tax-free lump sum while the fifth chapter considers using single rates of tax relief rather than relief given at the marginal tax rate.
To download the report, please click here.
To download the executive summary, please click here.
To download the press release, please click here.
To download a write up of the launch event, please click here.
To download the presentation from the event, please click here.
Keywords: tax relief, matching contributions, tax incentives, lifetime allowance, annual allowance, tax-free, lump sum, trivial commutation, Inland Revenue, HMRC, Her Majesty's Revenue & Customs, HM Treasury, Budget, pre-Budget,
DC, Defined Contribution, DB, Defined Benefit, Risk Sharing, Risk-sharing, Hybrid, Stakeholder, Personal Pension, Non-State, Contracted In, Contracted Out, COSR, COMP, GMP, Guaranteed Minimum Pension, Employer, Charges, Employer Sponsored, Contribution, Investment, PPF, Pension Protection Fund, Liabilities, Assets, Deficit, Surplus, Funding Level, Membership, Scheme Funding, Employer Covenant, annuity, annuities, annuitisation, annuitization, draw-down, drawdown, pension income, earnings, assets, state pension, private pension,