The HRMC has revealed that the cost of pension tax relief in the UK last year amounted to the astronomical sum of £51.6 billion.
This is due to the tax relief that UK citizens receive on contributions to their pensions (up to the annual allowance limit) and the NI relief that employers also receive on their contributions to their employee’s pensions.
Whilst this tax relief obviously comes at a great cost to the government, it is also a clear indicator that their plan to get more people investing in their pensions is working, meaning that more people are considering their future and retirement. Hopefully, this should also reduce the pressure on the government to support those who do not have sufficient provisions to make ends meet when they are forced to stop working due to age.
There has been speculation about whether the government will be reducing the tax relief on pensions available in order to decrease the amount of money they lose to the incentive program each year. However, as a result, people are likely to invest less in their pensions. The government will need to decide what they want to prioritize: a nation prepared for retirement, or a smaller bill on pension tax relief.
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This communication is for informational purposes only and is not intended to constitute, and should not be construed as, investment advice, investment recommendations or investment research. You should seek advice form a professional adviser before embarking on any financial planning activity. Whilst every effort has been made to ensure the information contained in this communication is correct, we are not responsible for any errors or omissions.