Tax relief on pensions now worth £21.2bn, latest HMRC figures reveal

The net cost of income tax relief on pension contributions will be £21.2bn this year, new figures released by HMRC show.

This total for the 2019/20 tax year compares to a figure of £20.4bn in 2018/19, and £17.9bn recorded five years’ ago in 2014/15.

There will also be a further £18.7bn worth of tax relief on employer and employee national insurance contributions in 2019/20, the HMRC analysis found. This amount was £17.4bn in 2018/19 and £13.8bn in 2014/15.

Commenting on the latest statistics, retirement specialists Just Group said that the pension tax relief “costs” were better seen as “investments” both for future pensioners and future governments.

Just Group communications director Stephen Lowe explained: “It’s unfortunate we have to describe pension tax relief as a ‘cost’ on society because it immediately suggests it's a burden on the taxpayer.

“Pensions are about providing a sustainable income for those no longer working – that’s hard to argue with when the alternative is pensioner poverty or a heavier burden on the state to provide for those without adequate income. Relief from tax is a core incentive to encourage people to think long-term and reduce the burden on future governments.

“The vast majority of people have lots of headroom in their allowance to save more if they can and claw more back from the taxman,” he added. “Pensions offer tax-efficient investing across a diverse range of assets in a safe way that’s subject to tight financial regulation.”

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