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Private Pensions

Table 27: Estimated costs of tax relief on private pensions (2017/18)[1]

Tax relief on:

Estimated cost (£ million)[2]

Relief paid on contributions into schemes:

Employees’ contributions to occupational pension schemes


Employers’ contributions to occupational pension schemes


Employees’ contributions to personal pension schemes


Employers’ contributions to personal pension schemes


Contributions to personal pensions by the self-employed



Relief paid on investment returns:

Investment income of funds[3]



Total tax relief on private pension contributions

£37,200 (1.8% of GDP)

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


Higher tax allowances for pensioners


Total relief (1)

£53,700 (2.6% of GDP)

Less tax liable on[4]:


Pension payments


Total tax received (2)

£18,300 (0.9% of GDP)


£35,400 (1.7% of GDP)



[1] HMRC (2019) Table 6 Cost of reliefs for approved pension schemes

[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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