Figures published by HM Revenue and Customs show that the Government has more than doubled the amount it pays out to employers in tax relief on pension contributions in the last six years as they try to plug gaps in occupational schemes.
The figures show that the government has paid out £12.3 billion in tax relief for employer and employee contributions to pension schemes in the 2004-5 tax year, even after the £8.6 billion taken back through the taxation of pension payments is taken into account.
Our view
Allowing for inflation and allowing for new rules requiring employers to pay much more, in a structured way, into company pension plans, is it any wonder that more has been offset against tax.
The relief is not by design, it is a by-product of forcing employees to ensure adequate funding of pension schemes.