The Government have been accused of ‘sneaking out’ statistics highlighting that the government coffers have siphoned off £4 billion more in income tax from desperately needed pension pots than was originally thought.
According to the Personal Pension Statistics, published by the Office for National Statistics earlier this week, tax on private pensions increased to £18.4 billion in 2017-18, this has increased by £17.9 billion a year earlier.
However, the Cost of Registered Pension Scheme Tax Relief report, published in February 2018, for liable tax on pension payments was only £13.5 billion. These reports were sharing identical data yet the older version was £4.2 billion short of the total published in its most recent publication.
How could the government be so careless as to overlook £4 billion from the report they published in February 2018? According to Royal London’s director of policy, Steve Webb, the most up to date data contains an accompanying note disclosing a new method of measuring the tax a pensioner now needs to pay on their pension.
Previously, the government used a sample survey to calculate the amount of tax paid. The government now use real-time information offered by pension schemes to assess the tax paid which is why the two reports have such a huge discrepancy. It also highlights that the government’s use of a sample survey has been a handy way of under reporting the huge amounts of money pensioners are currently paying in income tax contributions.
Additionally, the tax relief offered on pensions, which consists of the difference between the tax saved by people paying into their pension and the tax paid by pensioners, is actually around £5 billion less than previous estimations, indicating that relief could actually be expanded further.
Steve Webb, Director of Policy at Royal London, commented:
“It is outrageous that the government has sneaked out these massive revisions to the figures for the amount that pensioners pay in tax without any comment.
“It turns out that pensioners are paying more than £4 billion extra in tax on their pensions than the government previously admitted. It is clear that pensioners who have worked hard and saved hard are putting billions extra back into the economy through the tax on their pensions.
“The revised figures also show that the cost of tax relief on pension contributions is much lower than thought. The Chancellor must now revisit any thought of cutting help for pensions in the Budget later in the year.”
Does the government need to do more to ensure pension money stretches further? Should those receiving a pension expect to get further tax relief?
