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Private Pensions

Table 27: Estimated costs of tax relief on private pensions (2016/17)[1]

Tax relief on:

Estimated cost (£ million)[2]

Relief paid on contributions into schemes:

Employees’ contributions to occupational pension schemes

£4,600

Employers’ contributions to occupational pension schemes

£18,000

Employees’ contributions to personal pension schemes

£2,400

Employers’ contributions to personal pension schemes

£5,100

Contributions to personal pensions by the self-employed

£700

 

Relief paid on investment returns:

Investment income of funds[3]

£7,900

 

Total tax relief on private pension contributions

£38,600 (1.9% of GDP)

National Insurance that would have been paid had employer pension contributions been paid as salary

£16,200

Higher tax allowances for pensioners

£0

Total relief (1)

£54,800 (2.8% of GDP)

Less tax liable on[4]:

 

Pension payments

£13,500

Total tax received (2)

£13,500 (0.7% of GDP)

NET TAX RELIEF COST (1 - 2)

£41,300 (2.1% of GDP)

 



[1] HMRC (2018)Table PEN6  Cost of reliefs for approved pension schemes https://www.gov.uk/government/statistics/registered-pension-schemes-cost-of-tax-relief

and HMRC (2018) Estimated costs of the principle tax expenditures and structural reliefs
https://www.gov.uk/government/statistics/main-tax-expenditures-and-structural-reliefs

[2] Rounded to the nearest 100 million.

[3] Assuming relief at the basic rate of tax, which on interest payments is 20% from 1996-97.

[4] Tax liabilities on pensions in payment are the tax on pensions paid in the year, not the tax that might eventually be received on pension paid as a result of contributions made in the year.

 

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