cover image: A blueprint for a better tax treatment of pensions

20.500.12592/4zr58d

A blueprint for a better tax treatment of pensions

3 Feb 2023

Excluded from the modelling is any cap on the replacement of the 25% tax-free element which, as well as reducing the overall cost of the package, would also slightly increase the losses at the top of the distribution. [...] While the correct way to define and measure the ‘subsidy’ to pension saving is a point of debate – and will be addressed more fully in this report – there is no doubt that there are significant sums (running into the many tens of billions) at stake for the exchequer, much debate about the distributional consequences of pensions taxation design and significant scope to improve the targeting of savi. [...] Despite the change that has taken place, core concerns about the system remain – in particular, whether the system of taxes and reliefs applicable to pension saving offers the right level of incentives to make pension contributions to the right sort of people through the right means. [...] Employers providing these types of arrangements have a responsibility to pay out the pension income for the duration of the individual’s life from a normal pension age, with The Institute for Fiscal Studies, February 2023 17 A blueprint for a better tax treatment of pensions payments increasing in line with a measure of inflation, which in the private sector is often up to some limit. [...] An assessment of the distribution of income tax relief, relative to a benchmark of a pension system where tax relief was given on pension contributions, returns were not taxed, but pension income was taxed, would still show that those with higher lifetime incomes received a disproportionate share of income tax relief relative to the contributions that they made, at least across the bulk of the pop.

Authors

Stuart Adam, Isaac Delestre,; Carl Emmerson,; David Sturrock

Pages
109
Published in
United Kingdom

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