§ Ms HarmanTo ask the Chancellor of the Exchequer (1) what revenue he expects to raise in each year from the taxation of pension fund contributions under the basic pension plus proposal; and what assumptions this estimate is based on; [20437]
(2) what estimate he has made of lost tax revenue after 2040 due to the change in tax relief under the Government's basic pension plus proposal. [20434]
§ Mr. Jack[holding answer 17 March 1997]: It is broadly estimated that the annual savings to the Exchequer from the tax change on contributions would build up gradually from some £170 million in the first year after the change to about £8 billion by around 2040. Thereafter, these savings would continue, but would be offset by a decline in income tax on pensions in payment—from an annual yield of some £7 billion—as the population under the current pension regime reduces. This decline will coincide with a rapid fall in expenditure on state retirement pension which will reach some £40 billion a year in the longer term.
These estimates are very tentative and assume the current tax regime and levels of contributions and pensions in payment. It would not be appropriate to give 970W precise figures for each year, since the exact costs will depend on when the scheme is introduced, what the initial age limit is, and other details to be considered during the consultation.