Tax relief on pensions favours rich

Britain's highest earners are pocketing 20 times more tax relief on their pension contributions than ordinary workers, a new analysis has revealed.

Research by the investigative website Exaro, using the Government's own figures, found people in the UK earning more than £150,000 a year are attracting tax relief averaging £12,000 annually. This compares with hundreds of pounds for the typical pension saver.

In some cases, top earners are pocketing pension relief worth £25,000 a year. The analysis will increase pressure on the Government to reform pension-tax relief, which critics claim cannot be afforded at a time of huge public-sector spending cuts.

Under the current system, pension contributions are deducted before tax is paid. That means employees paying the 50 per cent top rate of tax benefit take significantly more than those who pay tax at the basic rate of 20 per cent.

In September, Nick Clegg told his party's conference that there was a "legitimate debate" to be had about the cost of pension relief for rich people.