Government ‘sneaked out’ figures on pensions’ tax
Steve Webb, Royal London director of policy, accused of ‘sneaking out’ figures on the cost of pension tax relief.
Figures for the 2017/18 tax year were published this week and showed pensioners paying £17.9 billion in income tax on their pensions in 2016/17 and £18.4 billion in 2017/18.
However, in the small print of the Table, it said that way tax was calculated for pensioners had been changed, specifically the figures are now based on ‘real time information’ supplied by pension schemes rather than a sample survey. This, more accurate, method, has added around £4 billion per year to the estimated amount of income tax being paid by pensioners.
Further analysis by Royal London shows that the overall cost of pension tax relief is more than £5 billion lower than previously thought. Webb said this undermines the Chancellor’s claims that the cost of tax relief is ‘eye-wateringly expensive’ and needs to be cut further.
Steve Webb, director of policy at Royal London said: ‘It is outrageous that the Government has sneaked out these massive revisions to the figures for the amount that pensioners pay in tax without any comment. It turns out that pensioners are paying more than £4 billion extra in tax on their pensions than the government previously admitted. It is clear that pensioners who have worked hard and saved hard are putting billions extra back into the economy through the tax on their pensions. The revised figures also show that the cost of tax relief on pension contributions is much lower than thought. The Chancellor must now revisit any thought of cutting help for pensions in the Budget later in the year.”
Pension income is taxable, except for the 25% lump sum. Income from Isas is not taxable, but savers do not get the same tax breaks on contributions as they do with a pension.