Retirement saving ‘too complex’

THE pension tax system is incomprehensible for savers and costs the state £47billion a year, a think-tank warns.

Workers paid only £9.4billion into their pension pots in 016-17, down 8 per cent from a decade earlier, the Centre for Policy Studies (CPS) found.

Pension tax relief means most savers pay nothing to HM Revenue and Customs on their pension fund. Instead, they can pay income tax when they draw their pensions after they have retired. But the CPS claims this costs the Exchequer £47billion a year.

CPS research fellow Michael Johnson said: ‘Roughly half of the adult population do not understand pensions tax relief. Consequently, it is unlikely to motivate them to save.’

Its report suggests axing relief and replacing it with top-up bonuses from the Government not linked to tax.