How much does the government invest in pensions?

Yesterday's news that the UK government is reducing the amount of money which can be injected into your pension fund in any one year from £255,000 to between £30,000 and £50,000 has caused some consternation in the financial sector. However, many people will be unaware that the UK government currently "invests" around £20 billion a year in individual pension arrangements via the tax relief system.

As we covered yesterday, previous governments have been very encouraging in this particular area offering sweeteners as a means of reducing the state pension liability going forward. However, these "generous arrangements" now seem to have backfired for the UK government and the cost of nearly £20 billion the year is enormous by any standards. The changes yesterday will hit the higher echelons of the UK financial arena and potentially save the UK government around £4 billion a year in reduced tax relief.

Whether this is a knee-jerk short-term reaction which will actually cost the UK government more in the longer term, via state benefits, remains to be seen but when you consider the overall cost of £20 billion a year then perhaps the UK authorities are valid in their concerns?