Pension Fund Reliefs

Lord Sikka Excerpts

Tuesday 4th February 2025 Lords Chamber

[Lord Livermore (Lab)]

I am not sure that the noble Lord should talk down the British economy in quite that way.

[Lord Sikka (Lab)]

My Lords, for 2023, the cost of tax relief on pension contributions was £46.8 billion, and another £23.8 billion of relief was given on related national insurance contributions. Some 63% of the total tax relief went to 6 million higher and additional rate taxpayers, and only 37% went to 28.1 million basic rate taxpayers. By fixing the tax relief at 20% for everybody, the Government can not only reduce inequalities but have £14.5 billion a year surplus. Will the Minister consider this reform?

[Lord Livermore (Lab)]

I am grateful to my noble friend for his question. He is correct that the Government spend around £70 billion annually on pension tax reliefs, because we want to encourage pension savings. That is why, for the vast majority of savers, pension contributions made from income during working life are tax free, and it is why, like many other countries, the UK exempts from tax the returns pension funds receive on the investments they make. Tax is not within the scope of the pensions review.