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Pensions tax relief reaches £33bn | Pensions tax relief reaches £33bn |
(about 17 hours later) | |
The amount of tax relief granted to people saving in registered pension schemes reached £32.9bn in 2010-11, figures from HM Revenue & Customs show. | The amount of tax relief granted to people saving in registered pension schemes reached £32.9bn in 2010-11, figures from HM Revenue & Customs show. |
Pensions receive some of the largest amounts of relief in the UK tax system. | Pensions receive some of the largest amounts of relief in the UK tax system. |
The Chief Secretary to the Treasury, Danny Alexander, suggested recently that the relief given to higher-rate taxpayers should be restricted to help the government save money. | The Chief Secretary to the Treasury, Danny Alexander, suggested recently that the relief given to higher-rate taxpayers should be restricted to help the government save money. |
The value of pensions tax relief has risen by 87% in the past 10 years. | The value of pensions tax relief has risen by 87% in the past 10 years. |
Of the £32.9bn given in relief in the last financial year, £6.6bn was accrued directly by individuals contributing to company or personal pension schemes. | Of the £32.9bn given in relief in the last financial year, £6.6bn was accrued directly by individuals contributing to company or personal pension schemes. |
A further £19.4bn was foregone by the exchequer because employer pension contributions are not liable for taxation. | A further £19.4bn was foregone by the exchequer because employer pension contributions are not liable for taxation. |
And pension schemes are also exempt from paying tax on their investment income, costing £6.8bn. | And pension schemes are also exempt from paying tax on their investment income, costing £6.8bn. |
In addition to the £32.9bn, employers were also exempt from paying national insurance on the pension contributions they made, costing the Revenue an extra £13bn last year. | In addition to the £32.9bn, employers were also exempt from paying national insurance on the pension contributions they made, costing the Revenue an extra £13bn last year. |
John Whiting, of the Chartered Institute of Taxation, said the figures indicated that company pension schemes were not dead yet. | John Whiting, of the Chartered Institute of Taxation, said the figures indicated that company pension schemes were not dead yet. |
"The relief on employee contributions has been pretty steady for the last few years, but the relief for employer contributions has risen a lot, probably because employers have had to put a lot more money into their schemes to plug deficits," he said. | |
Changes 'unlikely' | Changes 'unlikely' |
The HMRC has previously estimated that basic-rate taxpayers receive 39% of all personal tax relief, which would amount to £2.57bn of the £6.6bn for 2010-11. | The HMRC has previously estimated that basic-rate taxpayers receive 39% of all personal tax relief, which would amount to £2.57bn of the £6.6bn for 2010-11. |
HMRC estimates higher-rate taxpayers receive 43% of the relief - implying a total of £2.84bn in 2010-11. | HMRC estimates higher-rate taxpayers receive 43% of the relief - implying a total of £2.84bn in 2010-11. |
And 18% of the relief is estimated to go to additional-rate taxpayers earning more than £150,000, which would give an estimated £1.2bn of relief. | And 18% of the relief is estimated to go to additional-rate taxpayers earning more than £150,000, which would give an estimated £1.2bn of relief. |
Mr Alexander's suggested restriction of all personal relief to just 20p in the pound would lead to an estimated overall saving of about £2.14bn. | Mr Alexander's suggested restriction of all personal relief to just 20p in the pound would lead to an estimated overall saving of about £2.14bn. |
Tom McPhail of Hargreaves Lansdown said it was highly unlikely that pensions tax relief would be restricted in the forthcoming Budget. | Tom McPhail of Hargreaves Lansdown said it was highly unlikely that pensions tax relief would be restricted in the forthcoming Budget. |
"Firstly because at a practical level it is difficult to do without imposing significant complexity on the system," he said. | "Firstly because at a practical level it is difficult to do without imposing significant complexity on the system," he said. |
"Secondly it would be a very awkward U-turn for the Treasury to execute having reintroduced full higher-rate relief only about a year ago." | "Secondly it would be a very awkward U-turn for the Treasury to execute having reintroduced full higher-rate relief only about a year ago." |
More to come | More to come |
Other savings on pensions tax relief are already in the pipeline. | Other savings on pensions tax relief are already in the pipeline. |
The newly elected coalition government decided in 2010 that from 2011-12, the annual amount by which someone's pension pot can increase in value (either through employee and employer contributions, or through benefit accrual in a final-salary scheme) would be reduced from £255,000 a year to £50,000. | The newly elected coalition government decided in 2010 that from 2011-12, the annual amount by which someone's pension pot can increase in value (either through employee and employer contributions, or through benefit accrual in a final-salary scheme) would be reduced from £255,000 a year to £50,000. |
And from the 2012-13 tax year, the total value of anyone's accrued pension pot at retirement - the so-called lifetime allowance - will be reduced from £1.8m to £1.5m. | And from the 2012-13 tax year, the total value of anyone's accrued pension pot at retirement - the so-called lifetime allowance - will be reduced from £1.8m to £1.5m. |
The tax authorities estimate that these two measures will soon save about £4bn a year in tax relief. | The tax authorities estimate that these two measures will soon save about £4bn a year in tax relief. |
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