Tax Benefits in Non-State Pensions

Abstract

The significance of the tax system in assisting the development and expansion of non-state pensions has received very little attention at a time when concern has been generally increasing over the costs of public social security programmes, and particularly their pension systems. However, the limited evidence available indicates that the amount of tax revenue foregone in promoting this particular form of saving can be considerable. The distributive implications of the various tax reliefs also tend to be neglected, even though they play an important part in reinforcing inequalities in old age. This article seeks to explore the published information on the nature and scale of fiscal privilege for non-state pensions across countries and examines the way in which one country, the United Kingdom, estimates the costs of these tax benefits. Examination of the detailed evidence raises questions about the workings of these tax benefits in terms of equity and privilege, of cost and value for money. It supports the case for the development of more visible and publicly accountable estimates of these tax benefits, comparable across countries (as with public expenditure), as well as the better integration of tax and public spending in meeting needs during retirement.