If we desire investment then why does everyone want to tax pensions?

A fairly standard analysis of the UK economy at present is that we don’t have enough investment going on. Therefore we desire to have more investment, an obvious outcome from that analysis. The usual claim is also that we desire patient, long term, investment.

Private pensions are a £7, perhas £8 trillion, pot of such long term investment. That’s a very large pot of such investment too - getting on for three times the size of GDP, the annual economic output of the country as a whole.

Well, OK. But everyone seems to be competing to see how much more pensions can be taxed. It’s becoming a general sport. But taxing something simply always does lead to less of it. So, we tax pensions more heavily than we do now and people will save less into their pensions - so there will be less long term and patient capital around that can be invested into solving the base British economic problem.

This strikes us as being illogical. So, why then? What is the logic behind this seeming illogic?

It’s because they’ve already run out of everyone elses’ money, isn’t it.

That is, we didn’t in fact get rid of the socialists but perhaps we ought to?

Tim Worstall