Former pensions minister Steve Webb has accused the government of “sneaking out” new figures that show pensioners are paying more income tax on their pensions than previously thought.
Earlier this week HM Revenue and Customs published annual figures showing pensioners paid £17.9bn in income tax on their pensions in 2016/17 and £18.4bn in 2017/18.
But Webb, who is now director of policy at Royal London, points out that HMRC has changed the way it measures the tax.
Instead of using a sample survey, the figures are now based on “real time information” supplied by pension schemes
Webb adds what the explanation did not say is that though the method is more reliable method, it adds around £4bn per year to the estimated amount of income tax being paid by pensioners.
He says this was initially spotted by Centre of Policy Studies research fellow Michael Johnson, who pointed out the discrepancy when the figures for 2016/17 were last published in February 2018.
These reported pensioners had only paid £13.5bn – over £4bn less than is now estimated.
Webb says: “It is outrageous that the government has sneaked out these massive revisions to the figures for the amount that pensioners pay in tax without any comment.
“It turns out that pensioners are paying more than £4bn extra in tax on their pensions than the government previously admitted.
“It is clear that pensioners who have worked hard and saved hard are putting billions extra back into the economy through the tax on their pensions.
“The revised figures also show that the cost of tax relief on pension contributions is much lower than thought. The chancellor must now revisit any thought of cutting help for pensions in the Budget later in the year.”