Personal pension contributions hit a record high in 2015/16 with 9 million people contributing £24.3 billion into personal pensions
This exceeds the pre-financial crisis high of £20.9 billion in 2007/08
But the average annual contribution per individual has fallen from a peak of £3,690 in 2011/12 to just £2,690 in 2015/16
Net tax relief – which takes into account tax taken from pensions in payment – was £24.8billion (2014/15: £21.8billion)
Tom Selby, senior analyst at AJ Bell, comments:
“The Treasury’s pension tax relief bill is rising because automatic enrolment, the central plinth of the Government’s savings strategy, has been successful in boosting the number of people saving for retirement in the UK.
“However, it’s important to put the rising cost of pension tax relief in context. While a net annual bill of almost £25billion is a scary number, the key is that average savings levels per person remain way down compared to the peak of 2011/12.
“There has already been speculation that Chancellor Philip Hammond will take the axe to pension tax relief in his first post-Election Budget, and numbers such as these will inevitably add fuel to the fire. But it is vital that the embryonic savings culture being nurtured in the UK is not wrecked by a Treasury desperate to raise cash ahead of Brexit.
“Pensions have suffered from years of chopping and changing of tax incentives. We have reached a point in time where the political sting needs to be taken out of the pension tax debate through the establishment of an independent commission.
“Such a commission could propose reforms based on the long-term interests of savers and in the process rid us of the some of the horrific, unnecessary complexity that exists in the current system.”