§ Lord Oakeshott of Seagrove Bayasked Her Majesty's Government:
For the most recent year for which figures are available, and assuming no change in each individual's pension savings payments before receiving tax relief:
- (a) what single marginal rate of tax relief on all individuals' savings for pensions would be
WA 46 revenue neutral for the Exchequer, compared with the current differential rates of tax relief; - (b) what extra revenue would be raised for the Exchequer by a one point reduction in that single marginal rate of tax relief; and
- (c) how many individuals would (i) gain and (ii) lose from this change to a single marginal rate of tax relief. [HL775]
§ Lord McIntosh of Haringey(a) The average marginal rate on both individual and employers contributions is estimated to have been around 30 per cent in 2002–03. If there were no changes in contributions or behaviour this would be a tax neutral single rate compared with the current system, (b) Assuming the current rate of contributions and again no change in behaviour a 1 per cent reduction in a single rate of relief would reduce the current annual cost of tax relief by around half a billion pounds, (c) Around 2.5 million higher rate taxpayers would see the relief on their contributions reduced compared with now, which would also include a new tax charge on those with employer contributions, and around 13 million non-higher rate taxpayers would see their rate of relief on their contributions increased.
However, introducing a single rate of relief would not necessarily result in increased pension savings. There could be significant behavioural changes by individual pension contributors, employers and pension schemes. This is particularly likely for defined benefit schemes where the current net pay arrangements deliver relief at the individual's marginal rate of income tax and where employer contributions are typically made to satisfy the overall funding of the scheme rather than being attributable to particular individuals. Given the uncertain direction of these behavioural effects on contributions, it is unlikely that the figures given above would be realised.
47WA
§ Lord Oakeshott of Seagrove Bayasked Her Majesty's Government:
What estimate they make of the total annual cost, net of tax, to all employers currently offering stakeholder pension schemes to their employees of contributing to them at a rate equivalent to 3 per cent of those employees' earnings; and [HL776]
What estimate they make of the total annual cost, both gross and net of tax relief, to all employers of (a) five or more employees and (b) one to four employees, of making pension fund contributions at a rate equivalent to 3 per cent of those employees' earnings. [HL777]
§ Lord McIntosh of HaringeyDue to the complexity of modelling such schemes the information could be provided only at a disproportionate cost.
§ Lord Oakeshott of Seagrove Bayasked Her Majesty's Government:
For the most recent year practicable, what pensions savings payments were made in total by self-employed people; what percentage these represented of their total taxable earnings; and what actual amounts these represented on average for each self-employed person. [HL778]
§ Lord McIntosh of HaringeyAvailable estimates for 2002–03 are contained in the table below. The estimates are provisional and based on the Survey of Personal Incomes 2000–01 projected to 2002–03 levels of earnings and prices.
Self-employed contributors and contributions to private pensions1 Estimates Number contributing to a private pension 1.5 million Total contributions £3.7 billion Total taxable profit of contributors £42.8 billion Contribution as a percentage of taxable profits for contributors 8.5% Average contribution by contributor per year £2,500 1 This includes contributions to personal and stakeholder pensions and retirement annuity contracts.
§ Lord Hayhoeasked Her Majesty's Government:
What proportion of public sector employees is covered by (a) defined benefit occupational pension schemes; and (b) defined contribution schemes; and what proportion of defined benefit schemes has been closed to new members in the past 12 months for which reliable estimates are available. [HL818]
§ Lord McIntosh of HaringeyInformation is not held centrally on all public sector occupational pension arrangements. The design of pension schemes is largely a matter for public service employers, who have differing needs. However, the main multi-employer schemes covering public service occupations for teachers, the NHS, Civil Service and local government, police and fire services all offer defined48WA benefit pensions to eligible employees. There are over 4 million active members of these major public service schemes, but this number does not include employers in the wider public sector like the Bank of England, BBC or Post Office.
Public service schemes are reviewed regularly to ensure that they are a cost effective part of the overall remuneration package. Modernisation of pension arrangements may mean that a scheme or section of a scheme, closes to new members as a new scheme or section replaces it. In October 2002 the Principal Civil Service Pension Scheme opened a new section giving all new civil servants the choice of a defined benefit or defined contribution pension. Similar closures of schemes or sections may result from the pension scheme reviews of benefit structure to reflect, among other things, the decisions announced in the Green Paper Action on Occupational Pensions (Cmnd 5835 June 2003) to raise the normal pension age of public servants.