The cost of providing tax relief on workplace pension contributions is set to exceed £24bn in 2017-18, according to figures published by HM Revenue & Customs on Tuesday.
That figure represents an increase of about £400m from 2016-17. A similar increase of £550m brought the cost of not including pensions contributions in national insurance calculations to £16.9bn.
According to former pensions minister Steve Webb, now provider Royal London's director of policy, this combined total of £41bn also excludes tax breaks on personal pension contributions and the investment returns generated by pension funds.
When this £14bn cost is taken into account, he said the total cost of tax relief is around £55bn.
"The worry is that they will be tempted to use pension tax breaks as a ‘cash cow’, useful for dipping into whenever they are short of money," said Webb.
Tax relief has been changed six times since 2010, and the industry has long called for a moratorium on further tweaks.
Webb added: "It is time the government either pledged to refrain from tinkering with tax relief or set out a strategic long-term vision for how this public money could be better used. Treating tax relief as a piggy bank is not good policy."
