
1st July 2025
There are varying estimates of how much total benefit payments to people who have some form of disability, or who are paid benefits relating to their health, actually cost per annum. Figures I have seen vary between £66 billion a year and £75 billion a year. As a matter of compromise, let's put that figure at around £70 billion a year.
Now let me, for a moment, draw attention to the fact that the UK effectively spends £70 billion a year subsidising the total cost of pension tax relief for those who are saving for their old age. That figure is made up of reliefs available in income tax, for national insurance purposes, in the corporation tax system and on the tax-free accumulation of money with pension funds.
And, this cost of pension tax reliefs is a real cost, because when pensions are paid out, they are usually subject to tax at a much lower rate than the tax relief was given at, and no national insurance is paid, whilst, of course, corporation tax has no involvement at that time. What is more, one quarter of the pension paid is tax-free. So, before any pedants jump in and say that is no real cost to this tax relief, that claim is completely false.
In that case, the cost of benefits paid to those who cannot work because of conditions relating to their health or disabilities is, in real terms, near enough, the same each year as the cost to the government of subsidising pension tax reliefs.
That is, however, one very big difference. Based on data from the Office for National Statistics, I estimate that the wealthiest 10% of households in the UK own 39.8% of total UK pension wealth. Another 21.9% is owned by households in the ninth decile ranked by wealth. In contrast, the bottom half of households, as ranked by wealth in the UK, own just 9.5% of total pension wealth, and the bottom 70% of households own 24.6% of pension wealth.
Read the full article by Richard Murphy HERE