People want pensions to be taxed like ISAs – PwC research 25 August 2015

New PwC research reveals that people want their pensions to be treated more like Individual Savings Accounts (ISAs).

PwC surveyed nearly 1,200 (1,197) working adults following George Osborne’s consultation, launched in the Summer Budget, to radically review how pensions are taxed. When asked to choose the most appealing tax scenario for their pension, only just over a quarter (27%) picked the current system – where people and their employers receive tax relief on their pension contributions, and the pension is partially tax free at retirement with the remainder being taxed.

Moving pensions towards a similar tax treatment as ISAs, where you contribute out of post-tax income and any returns are tax free, is by far the most popular preference. Four in 10 respondents chose this answer as they say they would rather be taxed while they are working, than in their retirement. People also say it would help them better plan for their retirement as they won’t have to factor in tax deductions. Only one in seven people say the current tax exemptions on pension contributions incentivise them to save.

Six in 10 people say that constant changes by the Government to how pensions are taxed is the biggest barrier putting them off saving more into their pension. This is followed by people not understanding how much they need to save for an adequate retirement and the pensions system being too complicated.

The research reveals that the majority of people also don’t understand how pensions are taxed, with two thirds of people surveyed not able to correctly identify the current system. 

Philip Smith, head of PwC’s defined contribution pensions team, said:

“Our research shows that the current system is far too complicated and continuous changes are putting people off saving more towards their retirement.

“People want a once in a lifetime overhaul of how pensions are taxed to create a simple and stable system which they can understand and trust. Moving towards an ISA-style tax system would create consistency across people’s savings pots and help people plan for their future with more certainty. Our research shows people would much rather take the tax hit on their retirement savings while they are working, rather than having to worry about tax deductions in their retirement.

“However, moving to a new tax system for pensions is no easy task for an industry that is already grappling with the pensions freedom changes. This would require a huge re-think from employers, pension providers and the Government to how they provide pensions.”

Raj Mody, head of pensions consulting at PwC, said:

“The reality is that when it comes to tying up money for the long-term, people need an incentive. Otherwise why would you bother saving for your retirement when faced with more immediate pressures on your finances.

“We believe any new system should include a simple to understand incentive from the Government for retirement savings that would allow the lifetime and annual allowance tax regime to be abolished.”

Jonathan Howe, UK Insurance Leader at PwC, said:

“Pensions savings are a hugely important part of the UK retirement bank. Any reform must not reduce incentives for individuals to save for the long-term and increase the risk of a future pensions hole. 

“Up front reliefs can be a very important element and they also help make it clear that pensions are intended to be different - for long-term saving. The pensions industry is very aware of the importance of these incentives and a key focus is ensuring that customers understand how these work and why these are different to other savings tools.”


1.    PwC surveyed 1,197 working UK adults from 31 July to 3 August 2015. Results have been weighted to nationally representative criteria

2.   For interviews and more information please contact Amy Tiernan on 020 7804 0556 or, or Katherine Howbrook on

3.   For further commentary on market issues, visit our pensions blog:

Published on the PwC website 8th August 2015