I may have this wrong as I'm not a finance guy but this ticks me off.
We were told to save in to pensions and obtain all the tax relief as its providing for our future. Then come the time we need to use that money that we saved, the government taxes us on it anyway. What's the point of the relief if we just get kicked in the nads at the very time our income drops?
I think the idea is it's a semi forced way of saving, and opens the door to compound interest, which most are oblivious too.
Then there's the idea that when you are younger and earning 30-60k or whatever, you're in a higher tax bracket (or have more taxable income) and still paying for your house, kids, car or whatever. When you're older and taking a pension you should be able to get away with spending less, so have less, income so less tax/ lower tax bands etc.
100k into a pension goes in without paying any tax on that, and if you had it in your wages you might be getting taxed 30% on that, so would end up with 70k.
That 100k should become 150k or whatever in a pension, and then if you say took 10k a year for 15 years then you would pay no tax on it, as it would be in the tax free allowance. Even if you took 21.5k for 7 years, you're only paying 20% tax on maybe 70k of that, so 14k tax total. You're getting 135k out roughly, pretty much double what you would have otherwise got.
The problem is of course, that younger people are often skint, and house prices now are a much higher multiple v wages, so they can't afford to save in a pension, so they get hammered on the house, and then hammered as they can't afford the best way to save.
