§ Baroness Castle of Blackburnasked Her Majesty's Government:
What has been the cost in terms of loss of revenue of the tax relief granted on contributions to personal pensions since they were introduced; what is the current annual cost; and what would be the cost of extending such tax relief to contributions to SERPS. [HL2762]
§ Lord McIntosh of HaringeyThe annual cost of income tax relief at the basic rate for the employee part of the national insurance rebate for those contracted out of SERPS into appropriate personal pensions is shown in the table below. The additional cost of tax relief if all those currently in SERPS contracted out of SERPS and into personal pensions is tentatively estimated at around £300 million each year at 1998–99 levels of earnings.
Contributions made by individuals to personal pension schemes also enjoy income tax relief, and if an employer contributes to a personal pension, the contribution is allowable as a business expense and is not regarded as income or taxable benefit of the employee. The total cost of income tax relief for contributions to personal pensions including retirement annuity premiums and FSAVCs is published annually in Inland Revenue Statistics. 104WA
Basic rate tax relief on national insurance rebates paid to appropriate personal pension scheme administrators Year £ million1 1988–89 37 1989–90 208 1990–91 172 1991–92 204 1992–93 222 1993–94 240 1994–95 219 1995–96 220 1996–97 224 1997–982 218 1998–993 196 1 Figures are rounded to the nearest £ million. 2 Estimated outturn. 3 Forecast.