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Tax Relief on Employer and Employee Pension Contributions: Rationale, Value and Distribution

Frank Eich, Pension Corporation

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This briefing note focuses on one particular aspect of the British pensions landscape, namely that of tax relief. Tax relief has been a controversial issue for a long time and returned fully to the limelight in early 2009 when the Government announced that it would reduce tax relief on pension contributions for those on incomes of £150,000 and over, arguing that high income earners benefited disproportionately from the relief offered and would have otherwise benefited even further from recent policy changes.

This note provides some facts and figures on pension tax relief in the UK. Much of the information is based on 2006–07, the last year for which reliable outturn data are available. Before presenting these facts and figures though, the note discusses the rationale for providing tax relief—not only in the UK but more generally—and some recently expressed concerns regarding the efficiency of such policy.

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Original publication date:
March 2010
Copyright © 2010 Pension Corporation. All rights reserved.

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