A note on the tax treatment of private pensions and Individual Savings Accounts

Carl Emmerson () and Sarah Tanner
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Carl Emmerson: Institute for Fiscal Studies
Authors registered in the RePEc Author Service: Sarah Smith

Fiscal Studies, 2000, vol. 21, issue 1, 65-74

Abstract: The UK government is planning to introduce stakeholder pensions from April 2001 as an alternative to existing personal pensions for people on moderate earnings. But stakeholder pensions are only one way to save for retirement; the new tax-free Individual Savings Account (ISA) is another. This note compares the tax treatments of pensions and ISAs and assesses the conditions under which the tax treatment of private pensions is more generous than that of an ISA to a basic-rate taxpayer - the typical target for stakeholder pensions. The abolition of dividend tax credits paid to pension funds in July 1997 reduced the relatively tax-favoured position of pensions, but the tax-free lump sum means that private pensions continue to be a tax-favoured form of saving at most reasonable rates of return. We show that employer contributions to private pensions are particularly tax-favoured.

JEL-codes: H24 (search for similar items in EconPapers)
Date: 2000
References: View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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