Why relief doesn't come easy with pensions tax

Nobody understands it. It gives the greatest benefit to the wealthy. And it simply is not working as an incentive to get people saving into a pension. We are, of course, talking pensions tax relief.

This indictment is not new, but the issue has been edging up the political agenda and as the 2015 general election campaign kicks off, pensions minister Steve Webb will see it as a key piece of unfinished business ahead of a possible departure in May. 

The sense in offering tax relief is threefold: to incentivise workers and employers to contribute to a pension; to compensate people for locking away their cash; and to ensure they do not pay tax on the same income twice.

But the tool has often been criticised for being too complex – no matter how sweet the deal – and for delivering the greatest benefit to higher earners. 

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