HL Deb 06 December 2004 vol 667 cc25-7WA
Baroness Greengross

asked Her Majesty's Government:

What was the cost in 2003–04 of tax relief for pension contributions at (a) the basic rate of tax; and (b) the higher rate of tax; and whether they will estimate by how much the basic full state pensions would have increased on a weekly and annual basis if the amount spent in 2003–04 on higher rate tax relief for private pension contributions had been spent on the state pension. [HL118]

Lord McIntosh of Haringey

The estimated cost of tax relief in billions of pounds for private pension contributions made in 2003–04 by marginal tax rate is provided in the table below.

Contribution type Non-Higher rate Higher rate Total
Individuals 2.4 3.3 5.7
Employer1 4.5 6.2 10.7
1 On the assumption that contributions by the employer are not taxed as a benefit in kind to the employee, and that contributions are distributed in the same way as for individual contributions.

The estimates in the table do not represent the cost of withdrawing or restricting the current relief, since any such change would be likely to result in large behavioural changes. Due to the uncertainty of these behavioural changes, estimates are not available for how much the basic state pension could have increased.

Baroness Greengross

asked Her Majesty's Government:

Whether they will estimate what number and percentage of people aged over state pension age would pay (a) no tax; (b) tax at starting rate; (c) tax at basic rate; and (d) tax at the higher rate, if there were no age-related tax allowances for people aged 65 and over. [HL119]

Lord McIntosh of Haringey

The requested information is contained in the table below:

2004–05 Number of people over state pension age1 (thousands) % of all people over state pension age
(a) Non Taxpayer 5,120 46
(b) Starting Rate Tax2 980 9
Savings Rate Tax3 480 4
(c) Basic Rate Tax4 4,320 39
(d) Higher Rate Tax5 230 2
All pensioners6 11,130

The estimates are based upon the Survey of Personal Incomes (SPI) 2001–02 and Budget 2003.

Note:

The SPI is not representative of non-taxpayers and given the nature of this analysis the estimates should be treated with caution, as some pensioners would become taxpayers.

1 Men aged 65 and over and women aged 60 and over.

2 Taxpayers with a marginal rate at the 10 per cent starting rate from an extra £1 of earnings.

3 Taxpayers with a marginal rate at the 20 per cent lower rate for savings income or the 10 per cent ordinary dividend rate from an extra £1 of earnings.

4 Taxpayers with a marginal rate at the basic rate from an extra £1 of earnings.

5 Taxpayers with taxable income above the higher rate threshold.

6 Pensioner population estimates provided by the Government Actuary's Department.

Baroness Greengross

asked Her Majesty's Government:

What was the cost in 2003–04 of higher personal tax allowances for people aged over 65: and whether they will estimate by how much the basic full state pension would have increased on a weekly and annual basis if this sum had been spent on state pensions. [HL120]

Lord McIntosh of Haringey

I refer the noble Baroness to table T1.5 "Tax expenditures and structural reliefs" on the Inland Revenue websitehttp://www.inlandrevenue.gov.uk/stats/tax_expenditures/table1–5.pdf. Estimates are not available for how much the basic state pension could have increased if this sum had been spent on state pensions, due to the uncertainty of behavioural effects.