The government has said that it remains committed to ensuring pensioners have security in retirement, despite growing concerns that the upcoming changes to salary sacrifice, and recent pre-Budget speculation, could undermine saver confidence and trust.

In its revised response to AJ Bell's petition calling for a ‘pension tax lock’, the government emphasised that it wants to encourage pension saving, to help ensure that people have an income, or funds on which they can draw on, throughout retirement, highlighting the role of tax relief as a key incentive. 

"The government is committed to supporting savers at all stages of life. That is why, for the majority of savers, pension contributions made from income during working life are tax-free," it stated.

It also highlighted the cost of this support, noting that pensions tax relief is one of the most expensive reliefs in the personal tax system, costing £78bn in 2023/24.

"Investment growth of assets in a pension scheme is also not subject to tax," the government noted.

"From age 55 (or when scheme rules allow a pension to be taken), up to 25 per cent of the pension can be taken tax-free (capped for most at a maximum of £268,275), depending on scheme rules."

However, the government rejected calls for a pension tax lock, clarifying that it keeps all aspects of the tax system under review as part of the annual Budget process, and in the context of the wider public finance. 

This comes amid growing concern that the recent pre-Budget speculation may have damaged savers' confidence in pension tax measures and the ability for long-term planning.

These concerns were exacerbated after the news that the government would be introducing a cap on pension salary sacrifice, which many industry experts warned could go against the broader pension reforms being pursued by the government, particularly in terms of pension adequacy.

However, the government's revised response highlighted the ongoing work already being done to improve pension adequacy, stating: "The government recognises the importance of promoting confidence in pension saving and is committed to ensuring future generations of pensioners have security in retirement.

"This is why the government announced a landmark two-phased review of the pensions system days after coming into office."

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