- Expensive and Unequal
- Andrew Harrop
- 26 August 2024
- Pensions
In July 2024, chancellor of the exchequer Rachel Reeves MP confirmed that she will raise taxes in October’s budget. Reform of tax relief on pension contributions is said to be on her menu of options. Such changes have been proposed previously by the Fabian Society. In this report, the Fabian Society’s general secretary, Andrew Harrop, sets out the case for measures to reduce and redistribute pension tax relief. He also sets out a menu of reform options.
As things stand, individual pension contributions are exempt from income tax, employer pension contributions are exempt from income tax and national insurance, and pension investments are untaxed. This all falls under the umbrella of pension tax relief.
Almost all workers receive far more in tax relief on their pension contributions and investments than they can expect to pay in tax on their pension income. This is especially true for high earners. As Labour looks for revenue sources that do not breach its manifesto commitments, reform of pension tax relief should be a priority, Harrop argues.
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