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<p>The Government wishes to encourage pension saving, to help ensure that people have
an income, or funds on which they can draw, throughout retirement. This is why, for
the majority of savers, pension contributions are tax-free. Furthermore, investment
growth of assets in a pension scheme is not subject to tax. Up to 25% of the pension
pot can be taken tax-free. After this, payments of pensions are subject to income
tax at an individual’s marginal rate, to reflect the fact that these are a form of
deferred income and have not been previously taxed.</p><p> </p><p>In addition, the
Government is committed to keeping taxes low to ensure people keep more of what they
earn.</p><p> </p><p>In April of this year, the Government met its commitment to raise
the personal tax-free allowance to £12,500, one year early. This means the Government
has now raised the personal allowance by over 90% in less than a decade. In 2019-20,
over 32 million individuals will see their income tax bill reduced and 1.74 million
people on the lowest incomes will have been taken out of income tax altogether since
2015-16. A typical basic rate taxpayer will pay £1,205 less income tax compared to
2010-11.</p><p> </p><p>The Government keeps all aspects of the tax system under review
and any decisions on future changes will be taken as part of the annual Budget process
in the context of the wider public finances.</p>
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