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Pensions

Volume 448: debated on Tuesday 11 July 2006

To ask the Chancellor of the Exchequer what annual savings to 2012 he estimates would be made if the lifetime allowance for tax privileged pension savings was frozen at £1.5 million. (83071)

As announced in Budget 2004 the lifetime allowance on the amount of pension saving that can benefit from tax relief has been set for years to and including financial year 2010-11.

The revenue yield is very difficult to estimate and the figures provided are consequently uncertain. In particular there are consequences for transitional protection arrangements and scope for behavioural change. The estimate is based on the number of individuals constrained in their contributions to pension saving by the LTA.

If the LTA were fixed at £1.5 million for a further five years until 6 April 2012, we estimate reduced pension contributions would yield additional income tax of around £150 million, aggregated over five years. This estimate takes into account the estimated reduction in tax yields as a result of reduced pensions in payment these contributions would otherwise have funded.