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Pensions Bill

moved Amendment No. 139: 139: After Clause 22, insert the following new Clause— ““Report on tax relief on pension contributions The Secretary of State shall, not later than 1st April 2008, prepare and publish a report on tax relief on pension contributions, including— (a) the annual cost to the Treasury of these reliefs including projections for the following five tax years; (b) the extent to which the existing tax relief on pensions is— (i) affordable, and (ii) properly focussed, and (iii) comprehensible; (c) the amount of pensions tax relief received by the average household in each income decile; and (d) plans to reform tax relief to meet the criteria of fairness, affordability and incentivising saving.”” The noble Lord said: I tabled the amendment to put down a marker to stress our view that the existing tax relief on pensions is unfair, regressive and too skewed towards higher earners. The simple fact is that over half of tax relief goes to top-rate taxpayers, and about another 15 per cent goes to people who would be top-rate taxpayers were it not for this tax relief. That means that almost two-thirds of tax relief on pension saving goes to people who are better off. In our debate on the previous amendment, the Minister said that pensions outcomes for womenwere unfair. I welcome the interest that the Equal Opportunities Commission has shown in my amendment, and make its point that tax relief is unfair to women because they do not make up nearly such a large share of high earners as men. Four-fifths of tax relief at the top rate goes to men, which is a good deal more than their share of the labour force. I do not propose to press the point further, except to say that tax relief on pension contributions is going up quite quickly: it was £15 billion in 2005-06, and latest estimates are approaching £18 billion. That is happening particularly because under the new rules, on SIPPS in particular, quite a lot of better-off people are taking the opportunity to put in substantial sums—more than £200,000 a year—which again is proving to be quite a substantial tax break. One always has to remember that people get tax relief at the top rate and are able to take back 25 per cent of the money, often quite quickly, as a tax-free lump sum. We also believe that it is unfair because quite a number of people get top-rate tax relief when they make their pension contributions, but they pay only standard rate tax when they draw their pension in retirement. In that sense it is unfair as well. I beg to move.