Asked by: Baroness Altmann (Non-affiliated - Life peer)
Question to the HM Treasury:
To ask His Majesty's Government what estimate they have made of the proportion of (1) defined contribution, and (2) defined benefit, pension schemes that use salary sacrifice for auto-enrolled workers.
Answered by Lord Livermore - Financial Secretary (HM Treasury)
Whilst the government does not currently hold these figures, 39% of employers offer salary sacrifice and 35% of employees use it. We would expect that the vast majority of pension schemes using salary sacrifice include workers covered by pensions automatic enrolment. Automatic enrolment applies to workers aged between 22 and the State Pension age and earning at least £10,000 a year. The latest figures indicate that the majority (94%) of employees using salary sacrifice are eligible for auto-enrolment.
Asked by: Baroness Altmann (Non-affiliated - Life peer)
Question to the HM Treasury:
To ask His Majesty's Government whether they plan to make changes to tax and National insurance reliefs for salary sacrifice pension arrangements; and if so, what estimate they have made of the cost to employers, in particular in regard to the cost of changing payroll processes and renegotiating employment contracts.
Answered by Lord Livermore - Financial Secretary (HM Treasury)
The Government keeps all taxes under review as part of the policy making process. The Chancellor will announce any changes to the tax system at fiscal events in the usual way.
Asked by: Baroness Altmann (Non-affiliated - Life peer)
Question to the HM Treasury:
To ask His Majesty's Government, further to the Written Answer by Lord Livermore on 6 November (HL11291), what were the annual costs of the tax exemption of income receipts and capital gains in pension funds in the past three years.
Answered by Lord Livermore - Financial Secretary (HM Treasury)
Estimates of Income Tax relief on pension contributions can be found in Table 6 of the Private Pension Statistics publication. [1]
Table 6 summary: Estimated cost of pension Income Tax and National Insurance contribution (NIC) relief (£million) | |||
| 2021 to 2022 tax year [revised] | 2022 to 2023 tax year [revised] | 2023 to 2024 tax year [provisional] |
Total pension Income Tax relief | 45,300 | 47,800 | 54,200 |
- of which on Net Pay Arrangement contributions by employees | 5,100 | 5,500 | 6,200 |
- of which on Net Pay Arrangement contributions by employers | 16,100 | 17,400 | 20,800 |
- of which on Relief at Source scheme contributions by employees | 3,600 | 3,900 | 4,400 |
- of which on Relief at Source scheme contributions by self-employed individuals | 800 | 800 | 1,000 |
- of which on Relief at Source scheme contributions by employers | 5,900 | 6,700 | 8,100 |
- of which on Salary Sacrificed contributions by employees | 5,100 | 6,000 | 7,200 |
- of which on Deficit Reduction Contributions by employers | 4,300 | 3,100 | 2,100 |
Figures are in £ million and rounded to the nearest £100 million.
The column totals may not equal the sum of the individual components due to rounding.
HMRC does not hold data on the cost of the tax exemption of capital gains in pension funds.
[1] This publication can be access via the following link: https://www.gov.uk/government/statistics/personal-and-stakeholder-pensions-statistics
Asked by: Baroness Altmann (Non-affiliated - Life peer)
Question to the HM Treasury:
To ask His Majesty's Government what analysis they have carried out to quantify the loss of inherited benefits from pension schemes, in terms of reduced pension income and lower life insurance support, as a result of the imposition of inheritance tax on pensions at death.
Answered by Lord Livermore - Financial Secretary (HM Treasury)
Most unused pension funds and death benefits payable from a pension will form part of a person’s estate for inheritance tax purposes from 6 April 2027. This removes distortions resulting from changes that have been made to pensions tax policy over the last decade, which have led to pensions being openly used and marketed as a tax planning vehicle to transfer wealth, rather than as a way to fund retirement.
Estates will continue to benefit from the normal nil-rate bands, reliefs, and exemptions available. For example, the nil-rate bands mean an estate can pass on up to £1 million with no inheritance tax liability and the general rules mean any transfers, including the payment of death benefits, to a spouse or civil partner are fully exempt from inheritance tax. More than 90 per cent of UK estates will continue to have no inheritance tax liability in 2029-30 following these changes and the reforms will only affect a minority of those with inheritable pension wealth. Around 213,000 estates are expected to have inheritable pension wealth in 2027-28, with only 10,500 estates becoming liable to pay inheritance tax as a result of these reforms, and around 38,500 paying more than would previously have been the case.
The Government is continuing to incentivise pensions for their intended purpose of funding retirement.
Asked by: Baroness Altmann (Non-affiliated - Life peer)
Question to the HM Treasury:
To ask His Majesty's Government what latest estimate they have made of the cost per year of (1) tax relief, and (2) National Insurance relief, on new pension contributions unions.
Answered by Lord Livermore - Financial Secretary (HM Treasury)
Estimates of Income Tax relief on pension contributions can be found online in Table 6 of the Private Pension Statistics publication. [1] Estimates of the cost per year of Income Tax and National Insurance contribution relief, broken down by type of pension, can be found in Tables 6.1 and 6.2 of the publication respectively.
Table 6 summary: Estimated cost of pension Income Tax and National Insurance contribution (NIC) relief | |
Estimated cost of pension Income Tax and NICs relief | 2023 to 2024 tax year [provisional] |
Total pension Income Tax relief | 54,200 |
- of which contributed to a defined benefit scheme | 24,100 |
- of which contributed to a defined contribution scheme | 30,000 |
Total pension National Insurance Contributions (NICs) relief | 24,000 |
- of which contributed to a defined benefit scheme | 11,800 |
- of which contributed to a defined contribution scheme | 12,100 |
Total pension Income Tax and NICs relief (gross of tax charges) | 78,200 |
[1] https://www.gov.uk/government/statistics/personal-and-stakeholder-pensions-statistics
Asked by: Baroness Altmann (Non-affiliated - Life peer)
Question to the HM Treasury:
To ask His Majesty's Government how they intend to ensure that investors in long term asset funds are protected against the losses, gating and trading suspensions which have arisen when open-ended funds cannot sell their investments to meet redemptions.
Answered by Lord Livermore - Financial Secretary (HM Treasury)
The Long-Term Asset Fund (LTAF) was devised to bridge the gap between closed-ended funds and fully open-ended daily-dealing funds and fulfil the need for investment products that can provide funding for long-term projects while offering investors potential for higher returns in exchange for limited liquidity.
The FCA have designed robust governance requirements for the LTAF, so investors who understand the risks of investing in long‑term less liquid assets are able to invest with confidence. Where a firm markets an LTAF to a retail investor, the firm must provide appropriate risk warnings and conduct an appropriateness assessment.
The international Financial Stability Board (FSB) recognises that open-ended funds that invest in less liquid or illiquid assets while allowing investors quick and frequent access to their money, risk being unable to sell investments quickly enough to meet large investor redemptions. In 2023 the FSB published recommendations to address these vulnerabilities in open-ended funds. The FSB’s recommendations include assessing the appropriateness of redemption terms for open-ended funds holding less liquid and illiquid assets, which was a key consideration in the design of the LTAF.
The Government is supportive of the FSB’s work on open-ended funds and the regulators are considering the implementation of the recommendations.
Asked by: Baroness Altmann (Non-affiliated - Life peer)
Question to the HM Treasury:
To ask His Majesty's Government what assessment they have made of the suitability of (1) closed-ended and (2) open-ended investment companies for holding illiquid long-term real assets.
Answered by Lord Livermore - Financial Secretary (HM Treasury)
The Long-Term Asset Fund (LTAF) was devised to bridge the gap between closed-ended funds and fully open-ended daily-dealing funds and fulfil the need for investment products that can provide funding for long-term projects while offering investors potential for higher returns in exchange for limited liquidity.
The FCA have designed robust governance requirements for the LTAF, so investors who understand the risks of investing in long‑term less liquid assets are able to invest with confidence. Where a firm markets an LTAF to a retail investor, the firm must provide appropriate risk warnings and conduct an appropriateness assessment.
The international Financial Stability Board (FSB) recognises that open-ended funds that invest in less liquid or illiquid assets while allowing investors quick and frequent access to their money, risk being unable to sell investments quickly enough to meet large investor redemptions. In 2023 the FSB published recommendations to address these vulnerabilities in open-ended funds. The FSB’s recommendations include assessing the appropriateness of redemption terms for open-ended funds holding less liquid and illiquid assets, which was a key consideration in the design of the LTAF.
The Government is supportive of the FSB’s work on open-ended funds and the regulators are considering the implementation of the recommendations.
Asked by: Baroness Altmann (Non-affiliated - Life peer)
Question to the HM Treasury:
To ask His Majesty's Government what plans they have to protect UK-listed closed-ended funds against cost-disclosure regulations which deter investment.
Answered by Lord Livermore - Financial Secretary (HM Treasury)
In 2024, the Government legislated to enable the Financial Conduct Authority (FCA) to reform the UK’s retail disclosure regime to ensure consumers have access to the most useful information – including on risks, costs and performance – to support their investment decisions.
The FCA continue to engage with industry and will publish their final rules later this year.
Asked by: Baroness Altmann (Non-affiliated - Life peer)
Question to the HM Treasury:
To ask His Majesty's Government what assessment they have made of the impact of pension fund buyouts on the volume of gilt sales in the government bond market.
Answered by Lord Livermore - Financial Secretary (HM Treasury)
The volume of government gilt issuance is determined by the Office for Budget Responsibility forecast for cash borrowing, adjusted for redeeming gilts, any unanticipated under/over-financing in the previous financial year, and financing via other sources (such as National Savings & Investments).
Underlying demand for the UK’s debt remains robust, with a well-diversified investor base and the Debt Management Office’s gilt sales operations continue to see strong demand.
Insurance companies have fewer incentives to invest in gilts than Defined Benefit schemes, so insurance buyouts are expected to reduce demand from the sector over the longer term. This is well understood by the market. Gilts continue to offer benefits to insurance companies, though, and there are limits to the pace at which insurers can buy out pension funds.
Historically, we have seen changes in demand patterns from across the investor base. Overall demand has however remained resilient throughout these periods of changing investor patterns as a result of our policy of supporting a strong and diversified market. More generally, gilt yields are determined by a wide range of both domestic and international factors.
Asked by: Baroness Altmann (Non-affiliated - Life peer)
Question to the HM Treasury:
To ask His Majesty's Government what assessment they have made of the impact that (1) regulatory risk aversion, and (2) the encouragement of pension fund buyouts and the accompanying sales of holdings of UK Government bonds once buyout is completed, have had on the availability and cost of start-up and scale-up capital in the UK.
Answered by Lord Livermore - Financial Secretary (HM Treasury)
The government keeps the availability and cost of start-up and scale-up capital under close review. The government is taking action to ensure that UK businesses can access the capital they need to grow, and that the financial system supports innovation and economic growth.
The Chancellor’s remit letters put the Financial Conduct Authority and the Prudential Regulation Authority firmly at the heart of the Growth Mission, challenging them to go further to support growth and competitiveness. The letters made clear that there is an opportunity for more responsible and informed risk taking across the economy, and the government will support the regulators to enable this, including by facilitating innovation across the financial services sector.
Similarly, following a request in the Chancellor’s November 2024 remit letter to the Bank of England’s Financial Policy Committee, the BoE is working with HM Treasury and other authorities to assess how the financial system can better support sustainable economic growth, including by improving access to finance for high-potential small and medium-sized enterprises and for long-term investment.
The British Business Bank plays a key role in supporting start-ups and scale-ups, working with over 200 delivery partners (including banks and venture capital firms) to channel funding to SMEs that might otherwise struggle to access finance. Following the June Spending Review, the Bank’s financial capacity has increased to £25.6 billion, including the new £4 billion Industrial Strategy Growth Capital initiative, which will help address the scale-up financing gap for priority sectors.
The government is also working with private sector investors to enable more institutional investment into productive UK assets. This includes initiatives like the Pensions Investment Review and the Mansion House Accord. The British Business Bank is also supporting this effort through programmes such as the British Growth Partnership. Together, these actions will help address funding gaps in the market, including the availability and cost of start-up and scale-up capital.