UK pension savers set to gift £795 million to the taxman

Higher rate tax payers in their employer's occupational pension schemes could be missing out on as much as £795 million this year by failing to top up pension funds with additional tax relief added, according to research from unbiased.co.uk. And this is not even taking into account those who fall into the new 50% ‘super' tax bracket!

Higher rate taxpayers, who are members of their employer's occupational pension scheme, could be missing out on an extra £1,650 in tax relief each this year by failing to make Additional Voluntary Contributions and reclaiming the tax relief available to them.

AVCs run alongside employers' occupational pension schemes and allow employees to pay extra into their pension fund which should result in a larger pension pot at retirement.  AVCs benefit from the same tax relief as contributions paid into the main pension scheme.  If your AVCs are directly deducted from your pay, the tax relief (even at the higher rate) is immediate.  Otherwise higher/super rate tax payers can reclaim the difference between the rate they are paying and the 20% tax rate via HMRC.

Karen Barrett, Chief Executive of unbiased.co.uk comments: "The world of retirement planning and saving is fast changing and there are a variety of options available for savers looking to plan for their finances in later life.  Tax relief on pension contributions is free money available to you, helping you to boost your retirement pot.  This is even more important if you are a higher rate tax payer - adding an extra 40% or 50% to your retirement savings!

"While tax is becoming an increasing bugbear for the nation we are still seeing many people paying more than they need to and not using tax-efficient ways of saving.  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. Consumers should take action now and carry out a free and confidential search at unbiased.co.uk to find an independent financial adviser who can offer invaluable advice on the best way to save for retirement."