PensionsDec 5 2016

Hundreds of millions lost in tax relief on pensions

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Hundreds of millions lost in tax relief on pensions

A fifth of Britain's 7.9m personal pension savers have not claimed the full amount of tax relief they are entitled to, according to IFA firm True Potential.

Research by the firm calculates 1.6 million higher rate taxpayers will lose out on £360m this year or around £225 each, a figure that would rise to £6,750 at the end of a typical 30-year span of pension contributions.

Those earning more than £43,000-per-year are eligible for 40 percent tax relief on private pension contributions and while 20 percent of that is claimed automatically by their pension provider, savers must themselves claim the other 20 percent through a tax return.   

Research by True Potential into the habits of 24,000 savers shows that a fifth of private pension savers do not always claim what they are entitled to.

The reasons cited for not claiming the full tax relief include forgetfulness, not being aware of it and the perceived hassle of making a claim. 

The situation has become more common since 2010, as the number of people paying the 40 percent tax rate has gone from 3.3 million to almost 5 million. 

True Potential senior partner, Neil Johnson, said: “The days of pensions tax relief, especially at higher and additional rates, look to be numbered so my advice to everyone is to check that you’re getting the full tax relief that you’re entitled to before it’s too late.” 

Philip Church, proprietor of Pension Investment Management, likened the failure of some savers to claim their tax rebate to consumers purchasing a new mobile phone and not understanding how to use all its functions. He said there was a key role for IFAs in helping the public with this.