Taxation, Pension Schemes and Stakeholder Wealth

Advances in Taxation, Forthcoming

46 Pages Posted: 21 Sep 2017 Last revised: 14 Nov 2019

See all articles by Emmanouil Platanakis

Emmanouil Platanakis

University of Bath - School of Management

Charles Sutcliffe

University of Reading - ICMA Centre

Date Written: November 13, 2019


Although tax relief on pensions is a controversial area of government expenditure, this is the first study of the tax effects for a real world defined benefit pension scheme. First, we estimate the tax and national insurance contribution (NIC) effects of the scheme’s change from final salary to career average revalued earnings (CARE) in 2011 on the gross and net wealth of the sponsor, government, and 16 age cohorts of members, deferred pensioners and pensioners. Second, we measure the size of the twelve income tax and NIC payments and reliefs for new members and the sponsor, before and after the rule changes. We find the total subsidy split is roughly 40% income tax subsidy; and 60% NIC subsidy. If lower tax rates in retirement and the risk premium effect of the exempt-exempt-taxed (EET) system are not viewed as a tax subsidy, the tax subsidy to members largely disappears. Any remaining subsidy drops, as a proportion of pension benefits, for high earners; as does that for NICs.

Keywords: Pension Schemes, Taxation, National Insurance Contributions, Universities Superannuation Scheme, Redistribution, Rule Changes

JEL Classification: G22, H20, J32

Suggested Citation

Platanakis, Emmanouil and Sutcliffe, Charles M., Taxation, Pension Schemes and Stakeholder Wealth (November 13, 2019). Advances in Taxation, Forthcoming, Available at SSRN: or

Emmanouil Platanakis

University of Bath - School of Management ( email )

Claverton Down
Bath, BA2 7AY
United Kingdom

Charles M. Sutcliffe (Contact Author)

University of Reading - ICMA Centre ( email )

Whiteknights Park
P.O. Box 242
Reading RG6 6BA
United Kingdom

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