Tax relief for pension saving in the UK

Document type
Report
Author(s)
Echalier, Melissa; Adams, John; Redwood, Daniel
Publisher
Pensions Policy Institute
Date of publication
15 July 2013
Subject(s)
Poverty Alleviation Welfare Benefits and Financial Inclusion
Collection
Social welfare
Material type
Reports

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Tax incentives are seen as a means to encourage pension saving amid concerns that people are not saving enough for retirement. Pension saving attracts a level of tax relief that compares favourably with other types of saving. However, there are concerns that tax relief is expensive, poorly targeted and does not achieve its policy objectives. This report provides an overview of the pension tax relief system and examines the rationale for tax relief. It also considers the extent to which tax relief incentivises pension saving and considers some alternatives to the current system, including adjustments to the current framework of the tax relief system, changes to the tax-free lump sum, and using single rates of tax relief rather than relief given at the saver’s marginal rate.

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