Source · Select Committees · Public Accounts Committee
Recommendation 10
10
Tax reliefs on pensions contributions, designed to encourage people to save for their own personal...
Conclusion
Tax reliefs on pensions contributions, designed to encourage people to save for their own personal pensions, are among the largest tax reliefs. HMRC forecast that the gross cost of these reliefs totalled £38 billion in 2018–19.18 We were concerned by claims that the tax relief was not being taken up and was also potentially not encouraging savings in real terms. HM Treasury asserted that take-up of pension tax relief had “grown over time” and that there was some evidence that “amongst some people it is quite a popular product,” but did not provide details on this.19
Government Response
Not Addressed
HM Government
Not Addressed
1.3 The Government disagrees with the Committee’s recommendation. 1.4 The Government has undertaken several consultations on aspects of pensions tax relief over the last few years, including: a. Pensions tax relief administration: call for evidence (July 2020) b. Public service pension schemes consultation: changes to the transitional arrangements to the 2015 schemes (July 2020) c. Changes to income thresholds for calculating the tapered annual allowance from 6 April 2020 (March 2020) d. Reducing the money purchase annual allowance: consultation (response: March 2017) e. Strengthening the incentive to save: consultation on pensions tax relief (response: March 2016) 1.5 These investigations included gathering views and evidence from stakeholders to understand the regime’s impacts and the impacts of possible changes. The evidence provided directly influenced policy development. For example, responses to the 2015 wide-ranging consultation on pensions tax relief indicated there was no clear consensus for reform at that time, and so at Budget 2016 the then government announced it would not make fundamental reform to pensions tax reliefs at that stage. 1.6 The government will continue to engage with stakeholders to understand the regime’s impacts and gather evidence through consultations such as those listed above but does not think it is the right time now for a formal evaluation.