The Conservatives have announced that, if elected, they would cut taxes by £4.0 billion in 2007ְ8. Of this they have allocated £1.7 billion to increasing support for individual contributions to private funded pension schemes where these contributions attract relief at the basic rate of income tax. Currently each 78p contributed by non-higher rate taxpaying individuals (i.e. basic rate taxpayers, starting rate taxpayers and non income taxpayers) to private pensions attracts relief of 22p. The Conservatives proposal would add another 10p Government contribution to each 78p of individual contribution, but only when they are made to funded private pension schemes.
Under the Conservatives' proposal contributions made on individuals' behalf by employers, those that attract higher rate relief, and those made to unfunded public sector pension schemes, would not qualify for the additional support.
Authors
Carl Emmerson
Carl, a Deputy Director, is an editor of the IFS Green Budget, is expert on the UK pension system and sits on the Social Security Advisory Committee.
Matthew Wakefield
Matthew is Associate Professor at the University of Bologna focusing on consumption and savings choices and how policy affects them.
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