The cost of pensions tax relief for employers is £950m higher than originally estimated for the 2016/17 financial year according to figures published by HM Revenue and Customs.
Its updated estimates on the cost of tax relief show the bill for relief on National Insurance Contributions for employers is higher than previously thought.
Meanwhile the cost of personal pension contributions is £200m lower than estimated.
These figures will push up the forecast cost of combined relief to £40.95bn for 2017/18 compared to £39bn last year.
Relief on personal contributions accounts for £24.05bn and National Insurance relief on employer contributions accounts for £16.9bn.
Hargreaves Lansdown senior pensions analyst Nathan Long says: “The overall cost of relief on pension contributions for 2016/17 ended up being higher than anticipated.
“The revenue overestimated the relief granted to individuals, but underestimated the cost of relief to employers. This could be attributed to a combination of more employers choosing to operate their contributions through salary sacrifice and larger payments into final salary pensions than anticipated in attempt to shrink scheme deficits.”
On the prospect for tax relief reform in the near future, he adds: “While there is not the political inclination to change tax relief at present, if Brexit events were to send the economy into a tailspin, desperate times could call for desperate measures.”