Beware: the government could cut tax relief on pension contributions

The government may soon cut tax relief on private retirement savings, says David Prosser.

Rishi Sunak
Sunak: will he take this once-in-a-lifetime opportunity to pounce?
(Image credit: © Stefan Rousseau-WPA Pool/Getty Images)

Will chancellor Rishi Sunak take the axe to tax relief on private pension savings? Successive chancellors have been rumoured to be considering such changes, only to desist. But there is growing concern in the pensions industry that Sunak might see the need to repair the public finances following Covid-19 as providing the cover he needs to act.

Pension-tax relief is certainly a tempting target. It cost the Treasury £21.2bn in the 2019-2020 financial year, the last for which data is available. And it is a relief that is more valuable to the wealthy: since savers get the relief at their highest marginal rate of income tax, higher-rate taxpayers get twice as much support when making the same pension contribution as basic-rate taxpayers.

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David Prosser
Business Columnist

David Prosser is a regular MoneyWeek columnist, writing on small business and entrepreneurship, as well as pensions and other forms of tax-efficient savings and investments. David has been a financial journalist for almost 30 years, specialising initially in personal finance, and then in broader business coverage. He has worked for national newspaper groups including The Financial Times, The Guardian and Observer, Express Newspapers and, most recently, The Independent, where he served for more than three years as business editor.