Pension savers miss out on £720 million

Research recently published by Unbiased has revealed that UK pension savers are missing out on £720 Million in tax relief by failing to top-up their employers' pension schemes. Higher rate tax payers who make additional contributions are entitled to tax relief at up to 40% on contributions, which they make to improve their retirement income. These can be to the employer's scheme or to a private arrangement.

With many schemes under pressure and reducing the rate at which future benefits build up, or even ceasing to provide future benefits, it has never been more important for people to take personal responsibility for their retirement planning. Tax breaks are available for pension contributions as well as for other forms of saving. Unbiased have provided a tax waste calculator to help you find out whether you are making full use of the relief available to you. Find out how much tax you are wasting here

Is Higher Rate Tax Relief On Pensions Under Threat?

A number of commentators have suggested that The Chancellor will abolish higher rate tax relief on pension contribution in The Budget on 22nd April.

Financial Times

Yahoo Finance

These could just be 'buy now while stocks last' rumours but there may be some truth in them, given the financial pressure, which the government is under.

If in doubt, it would make sense to bring forward contributions to prior to the Budget. It is unlikely that any changes will be retrospective but this can not be ruled out.

If tax relief is removed, this should not be a reason to stop making savings for retirement. After all, at some stage, like it or not, employment and the earnings associated with it will cease. When that day comes, there needs to be a replacement source of income. This does not just need to be provided by way of a pension but as long as there is some tax relief on contributions they probably have the edge on other methods of saving. See my last blog for more information on this.