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Tax relief and partnership pensions

By Philip Agulnik and Julian Le Grand

Abstract

Government support of private (occupational and personal) pensions through the system of tax reliefs is large: between one quarter and one third that of direct support of state pensions through public expenditure. However, it is regressive, lacks transparency and is difficult to control. This paper argues that it should be replaced by a cost-neutral matching grant or tax-credit scheme. Such a scheme would embody the ‘partnership’ idea implicit in much government policy in this area, but would be much more progressive, more open, and more accountable than existing arrangements. The argument is illustrated by statistical comparisons of the distributional impact of the present system and three alternative versions of the tax-credit scheme. An appendix discusses the methodology for calculating the cost of pension tax reliefs over time

Topics: HJ Public Finance
Publisher: Centre for Analysis of Social Exclusion, London School of Economics and Political Science
Year: 1998
OAI identifier: oai:eprints.lse.ac.uk:4652
Provided by: LSE Research Online

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