Tax relief on pensions savings cost the Treasury £38.4bn over 2017/18 as savers contributed £27.5bn in personal pensions over the same period.

It is the largest amount of tax relief offered by the government over the past five years, however figures have been relatively flat over the past three years, with the cost of tax relief recorded at £38.6bn and £37.3bn for 2015/16 and 2016/17 respectively.

The 2017/18 net figure decreases to £20bn when income tax paid on pensions withdrawals is taken into account.

Hargreaves Lansdown senior analyst, Nathan Long, commented: “The cost to the taxpayer of providing our pensions has remained flat as Treasury measures designed to limit contributions from the highest earners begin to bite.

“These tweaks are impacting heavily on certain professions, despite occupational schemes accounting for the lion share of the tax relief cost, as employers are still required to shovel money into their defined benefit pensions to prop them up.”

Despite this, Quilter pensions expert, Ian Browne, believes the figures are encouraging.

The number of individuals contributing to a personal pension increased to 8.5 million in 2016/17, while average contributions increased to £3,200.

Furthermore, individuals made up 41 per cent on contributors, up from 19 per cent in 2012/13.

“Auto-enrolment is due a lot of credit for this success. We know that saving early is a crucial ingredient in building up a healthy retirement pot,” Browne said.

“As defined benefit pensions and other benefits enjoyed by previous generations are phased out, it will be increasingly vital for today’s working age people to set money aside throughout their careers.”

“However, these figures don’t tell the full story as there remain pension inequalities throughout the nation. The split between men and women contributing to pensions remains 40 per cent woman and 60 per cent men across all age groups.”

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