Tax Relief and Partnership Pensions

Government support of private (occupational and personal) pensionsthrough the system of tax reliefs is large: between one quarter and onethird that of direct support of state pensions through public expenditure.However, it is regressive, lacks transparency and is difficult to control. Thispaper argues that it should be replaced by a cost-neutral matching grant ortax-credit scheme. Such a scheme would embody the ‘partnership’ ideaimplicit in much government policy in this area, but would be much moreprogressive, more open, and more accountable than existing arrangements.The argument is illustrated by statistical comparisons of the distributionalimpact of the present system and three alternative versions of the tax-creditscheme. An appendix discusses the methodology for calculating the costof pension tax reliefs over time.[...]