Brits remain in the dark over pension tax relief rate as deadline looms
The countdown is on for the end of the tax year, but Brits are still in the dark over their pension tax relief, causing them to miss opportunities to boost their wealth.
Almost nine in ten people do not know the rate of tax relief they receive on pension contributions, according to the latest research from Pension Bee.
Just 12 per cent of 18 to 66 year olds were aware of their exact personal tax relief, despite the valuable incentive it gives to UK savers, as the noise surrounding saving enough to afford retirement grows.
Meanwhile, almost a third of Brits admitted being unaware that pension contributions even offered tax relief, while a similar proportion knew what it was, but did not know the rates available.
A further 14 per cent confirmed that they did not currently save in a pension, leaving them at significant risk of having no funds for later life.
Lisa Picardo, chief UK business officer at Pension Bee, said: “Pension tax relief is one of the most valuable incentives available to UK savers, yet our research shows that most people don’t fully understand how it works, or even that they benefit from it.
“With the end of the tax year approaching, it’s a good moment for savers to review their finances and consider whether they could make an additional pension contribution.
“Even a small top-up can receive a boost through tax relief, helping retirement savings grow over time.”
Considering a top up
While some Brits remain stumbling in the dark, others are considering boosting their savings ahead of the April 5 deadline.
Around one in five plan to make a further contribution beforehand, while nearly one in ten confirmed they had already done so.
But nearly 50 per cent said they do not plan to make an additional contribution.
For higher and additional rate taxpayers in particular this can be a considerable loss, as they are able to claim extra relief through Self Assessment.
Higher rate taxpayers can claim an additional 20 per cent, while additional taxpayers are able to claim a further 25 per cent, according to HMRC rules.
For those with access to salary sacrifice schemes through their workplace, contributing to a pension can also bring additional tax and national insurance savings, but this is expected to change in the future.
ISAs on top
While pensions are viewed as one of the most beneficial long-term savings vehicles by industry figures, investors confirmed they were more likely to allocate spare savings elsewhere.
Respondents were most likely to place spare money into savings accounts and ISAs, emphasising the ongoing popularity of tax-efficient and easily accessible options.
Others opted to pay down a mortgage, while 11 per cent confirmed it would go into their pension.
Picardo said: “While savings accounts and ISAs are often the first options people think of, pensions remain one of the most important tax-efficient ways to invest for the long term. Improving awareness of these benefits could help more people make the most of the incentives available to them.”