Question to the HM Treasury:

To ask the Chancellor of the Exchequer, what plans he has to raise the pension tax allowance above the current rate of 25 per cent.

The Government wishes to encourage pension saving, to help ensure that people have an income, or funds on which they can draw, throughout retirement. This is why, for the majority of savers, pension contributions are tax-free. Furthermore, investment growth of assets in a pension scheme is not subject to tax. Up to 25% of the pension pot can be taken tax-free. After this, payments of pensions are subject to income tax at an individual’s marginal rate, to reflect the fact that these are a form of deferred income and have not been previously taxed.

In addition, the Government is committed to keeping taxes low to ensure people keep more of what they earn.

In April of this year, the Government met its commitment to raise the personal tax-free allowance to £12,500, one year early. This means the Government has now raised the personal allowance by over 90% in less than a decade. In 2019-20, over 32 million individuals will see their income tax bill reduced and 1.74 million people on the lowest incomes will have been taken out of income tax altogether since 2015-16. A typical basic rate taxpayer will pay £1,205 less income tax compared to 2010-11.

The Government keeps all aspects of the tax system under review and any decisions on future changes will be taken as part of the annual Budget process in the context of the wider public finances.