It’s always about tax

July is usually a time for thinking about holidays, sun and relaxation. In July 1917 more serious things were afoot. The previous July had witnessed the Battle of the Somme, one of the bloodiest of the First World War. This July saw the beginning of the Third Battle of Ypres – better known as Passchendaele – which ended only in November that year.

In London, 11 men sat at a table and discussed pensions. Tax policy was high on the agenda: although some employers already sponsored pension schemes, incentives would surely lead to the practice becoming widespread. The lobbying efforts of those people* bore fruit in the tax relief framework established by the Finance Act 1921, which kick started a vast expansion in occupational pensions coverage. A perfect example of tax policy driving a desired outcome.

Could the use of tax policy be extended to encourage objectives such as investment in British business and infrastructure? Instead of compulsion, tax relief could be restricted to those who complied with requirements. Since tax reliefs come out of the public purse it is argued, they should be used for the greater good.

But giving tax relief on this principle could be controversial. Civil servants, for example, enjoy a disproportionate share of tax reliefs, escaping income tax on very high contributions made by their employer. Would the interests of the public good and taxpayer suggest that these reliefs should be balanced in some way, perhaps by productivity improvements?

Pensions Archive Trust Director, Jane Marshall

* In January 1923, this group helped form the Association of Superannuation and Pension Funds, now known as Pensions UK

This article was first published in the July / August 2025 edition of Pensions Age magazine