Pensions: Tax Relief

Baroness Lister of Burtersett Excerpts

Tuesday 6th December 2016 Lords Chamber

[Lord Young of Cookham]

The ISA is indeed an acceptable vehicle for savings. It does not have the advantage of the pensions regime, whereby your own contribution is topped up by that of your employer; to that extent, pensions may be a better vehicle for some people than the ISA. Also with pensions, as my noble friend has just said, you get the tax relief up-front, which you do not get with the ISA. The important thing is that there should be a variety of savings vehicles with different advantages and different flexibilities, and people should make an informed decision about which is the right one for them.

[Baroness Lister of Burtersett (Lab)]

My Lords, surely the overwhelming case for a flat-rate approach is a distributional one. Pension tax relief disproportionately benefits the better-off in our society. At a time when the Government are cutting financial support for poorer people and saying, “We have no other choice because we have to save money”, surely they should be looking at this again.

[Lord Young of Cookham]

The Government have consistently reduced the cost of tax relief on pensions by introducing the lifetime allowance, which has now been reduced to £1 million, and the annual allowance, which has been reduced to £40,000. This year we made further savings of up to £4 billion over the lifetime of this Parliament by saying that for those who earn over £150,000 the £40,000 relief is tapered. So we have made substantial savings in the cost of pensions tax relief.