…whilst the pension dash for cash stabilises
HMRC have released new data on the cost of pension tax relief to the Treasury.The data shows:
65 per cent increase in cost of tax relief on employer contributions to personal pensions over 3 years. In 2016/17 the cost was £5.1 billion, up from £3.1 billion in 2013/14
Tax taken on pension withdrawals has stabilised in the wake of pension freedoms. The tax receipts from pensions in 2016/17 were £13.5 billion, up only £100 million since 2015/16
Total net cost of Treasury pension tax incentives now stands at £41.4 billion
Nathan Long – Senior Pension Analyst at Hargreaves Lansdown
‘The nation’s future retirement prospects rely on people taking personal ownership of their pension savings. Employers are shovelling more money into personal pensions which allow people to take greater control of their retirement planning. Initiatives like a mid-life MOT which helps people understand what the end of their working life will be like, and the pension dashboard which allows people to see all their retirement savings in one place will only make personal ownership more popular. Hargreaves Lansdown are also lobbying Government to give individuals the right to choose where their workplace pension contributions are directed.
There is evidence in the data that the initial pension freedom dash for cash has abated, with the tax receipts having stabilised. The rule changes were brought in quickly and were always going to take time to bed in.
Incentivising people to save for their future is critical, but with minimum workplace pension contributions increasing in April, there is only so long before the current system gets an overhaul. We expect the advantages for higher and additional rate tax payers to be dialled down at some point, so paying as much as you can now could be sensible.’