Ian Browne, pensions expert at Quilter takes a view
When budgets get tight people often start looking at what is costing them the most and where they can start to save. The government is no different and pension tax relief is often one port of call when they need to cut back on the spending.
The most recent figures from HMRC on tax relief reveal the extent of the cost – with £21.2bn being spent on pension tax relief in 2019-20, and that’s before you factor in the relief on employer contributions to registered pension schemes. Once all that is added in you’re looking at £39.9bn in a tax year. And let’s not forget the cost of the state pension – which adds an additional £98.9bn.
It’s easy to see why that looks like an appealing chunk of change, particularly when we’re in the midst of political fight for power. However, any kind of reform needs careful thought and should not just be a political play.
There is a strong case for government to establish a cross-party independent commission, similar to Adair Turner’s pension commission of the early 2000s. Retirement and savings policy is by its very nature a long-term matter, with policy decisions today having a ripple effect into the future and across generations. Savers and the pensions industry can’t afford for government to make mistakes on key pensions policy and establishing a consultative approach to policymaking via an independent commission would be responsible step for any government to take if they are serious about building a healthy and sustainable savings culture.
