Call to make tax relief on pensions simpler and fairer

29th June 2020 by RetireEasy

The Association of British Insurers (ABI) has called for changes to tax relief on pensions to make the system more equal.

The move comes in the wake a report from the Pensions Policy Institute (PPI) which demonstrated that higher earners gain most from the current system – particularly men.

Tax relief tops up pension savings, alongside the saver’s own contributions and those of their employers. For higher earners, tax relief is paid on pension contributions at the highest rate of income tax they pay. Those on basic-rate taxpayers receive 20% pension tax relief, higher-rate taxpayers 40%, while additional-rate taxpayers can claim 45% pension tax relief.

The PPI report, commissioned by The ABI, found that people on higher incomes further benefit because they are also likely to have more funds available to put into their pension than lower earners.

The report found that people paying basic rate tax make up 83.4% of total taxpayers but only receive 26% of the total amount of pensions tax relief related to defined contribution (DC) pension contributions.

A single “flat rate” could help distribute tax relief more evenly, making it fairer to all earners and encouraging lower earners to save more for retirement.

Yvonne Braun, director of long-term savings and protection at the ABI, says: “Pensions tax relief plays a vital role in encouraging people to save, but also in supporting the adequacy of that saving. However, the distribution of pensions tax relief under the current system exacerbates existing inequalities, particularly between men and women.

“We hope the research will provide food for thought on how to make the system simpler and fairer.”



How on track are YOU with your retirement finances? makes it easy – you only have to set up your finances once, and then keeping up to date is easy. The ability to model different scenarios means that you can find the easiest way for YOU to manage your finances AND retire in comfort.

Find out your retirement income for just £4.99 per month. Here’s how


New features on RetireEasy.

Not yet retired?

You can now include all your additional savings, investments and Pension Contributions between now and your retirement, taking into account increasing these Additional Contributions year-on-year and stipulating whether these are one-off or recurring contributions. As always, you can revisit these projections and change them at any time either when your expectations change, or you have real numbers to replace projections already made.

New useful charts?

There are now three additional charts, further breaking down your assets and income.

Download your data in a spreadsheet?

You can now also download spreadsheets giving you the opportunity to view all of your entered information, and your entire LifePlan in one glance.

Sign up now