The cost of tax relief on pension contributions has reached £38.6bn, only £100m more than the previous year, after jumps in 2015 and 2010. Deducting pension-related tax, the figure comes down to £25.2bn.
The bulk went to employers, who were given £18bn of tax relief for paying into occupational pension schemes and another £5.1bn for contributions to personal pension schemes, figures from HM Revenue & Customs show.
A large proportion, £7.9bn, was tax relief on investment income of pension funds, with the remainder related to individuals.
Steve Webb, director of policy at provider Royal London, said: “Successive chancellors have viewed pension tax relief as a ‘honey pot’, convenient to dip into whenever they are short of money. But pensions should be a long-term business.”
He added: “It is time that the chancellor committed to no more changes to tax relief for the rest of this parliament... instead, there needs to be a focus on the self-employed, whose level of pension saving remains worryingly low.”
