£2.5 billion of income tax relief on pension contributions remains unused

4 million Brits currently in employment but not paying into a pension are likely to consider contributing go to unbiased.co.uk to find an IFA to help with your retirement planning

The latest figures from unbiased.co.uk's Tax Action report reveal that 4 million Brits who are currently not paying into a pension but say they are likely to consider doing so, are currently leaving £2.5bn* of income tax relief on pension contributions unused.

The latest HMRC figures reveal the average pension contribution made by individuals per year is £3,010**.  Research shows that employees could be boosting their pension pot by as much as £602 each and £2.5bn collectively by taking advantage of tax relief on pension contributions, and this is just for basic rate payers.  Anyone paying towards a pension receives tax relief on their pension savings at 20% and up to 40% or 50% as appropriate.  Higher rate taxpayers could benefit from saving into a pension potentially adding up to £1,204 in tax relief.

Under current rules when you pay money into a pension, the government effectively adds an extra 20% of the total contribution.  In practice, this means that for every £100 you want to save, you only need to contribute £80 of your own money (and £60 for a higher rate tax payer and £50 for an additional rate tax payer respectively).  

Karen Barrett, Chief Executive of unbiased.co.uk, comments:  "Saving into a pension can be one of the most tax efficient methods of saving for retirement, however people rarely think about the tax benefits.  Tax relief on pension contributions is free money available to you, helping you to boost your retirement pot.  

"The effect of tax relief on pension payments over time can be considerable but proactivity is vital to ensure consumers are making the most of these tax-efficient saving vehicles.  This is even more important if you are a higher rate taxpayer where the onus is on you to claim back the additional tax relief owed to you.  So don’t sit back and wait until the government’s pension enrolment scheme comes into force before taking tax action, the sooner you start saving, the more time you have for your money to grow.  A discussion with an IFA is a good way to ensure you are planning effectively for retirement and can help put your financial affairs in order.

"To seek help from an IFA who can walk you through your options, log on to www.unbiased.co.uk to carry out a free and confidential search."

 ENDS

* Based on desk research by Opinium Research 4,074,400 adults in the UK are currently in employment and not contributing towards a pension however, simply based on their age and earnings, are very likely considering contributing towards a pension. Multiplying those 4.1 million adults with the annual income tax savings of £602, results in a total avoidable waste of £2,452,788,800 or £2.5 billion.

** This figure is from the ONS Pension Trends 2011 report

For more information contact:

Karen Barrett, Chief Executive, unbiased.co.uk:  020 7833 3131

Lisa Grando/ Emily Falla/ Maddy Morgan Williams, Lansons Communications:  020 7294 3682

For expert commentary or case studies from over 190 media-friendly IFAs, journalists should visitwww.unbiased.co.uk/bluebook.

Twitter: @unbiased_co_uk

LinkedIn: Unbiased.co.uk - Online networking for professional advisers

About unbiased.co.uk, the professional advice website

The unbiased.co.uk portal is a free and confidential UK-wide search matching consumers with local professional advisers: ‘find an IFA’, ‘find a mortgage adviser’, ‘find a solicitor’, and ‘find an accountant’. These searches enable consumers to find professional advisers by postcode, area of specialism, qualification and payment method. In 2011, unbiased.co.uk fulfilled around 450,000 searches for local, professional advice. 

Unbiased Ltd promotes the benefits of independent financial advice to consumers.  Unbiased Ltd is supported by the following companies: