How should pensions be taxed?

Pensions are the biggest component of household wealth and are treated favourably by the tax system. Getting pensions tax policy right matters both for people’s wellbeing in retirement and for the taxpayer.

There has been substantial reform of pensions taxation in recent years. But these reforms have often been piecemeal and badly designed and have left a system which still has expensive tax reliefs that are not well targeted at encouraging saving among those most at risk of underproviding for retirement.

At this event we presented the findings of a new major piece of research which sets out how pensions are taxed and where there are principled reasons for reform. It proposes a set of reforms to how pensions are treated by income tax, National Insurance contributions and inheritance tax, alongside careful analysis of what these reforms would do to the support for pension saving provided to different types of individuals.

At the event there were presentations from IFS authors, followed by a response from David Gauke, Head of Public Policy at Macfarlanes and former Secretary of State for Work and Pensions, and Josephine Cumbo, Global Pensions Correspondent at the Financial Times.