About a third of individuals (35 per cent) appear unaware that the government is contributing tax relief to their pensions, new research from The People’s Pension has found.
The survey from the master trust provider, which polled more than 2,000 UK pension savers, found the vast majority of people (90 per cent) saw benefits in having been auto-enrolled into a pension.
However, many said they were unaware that their employer and the government also made contributions to their pension pot.
The research showed more than half of those saving into a pension (55 per cent) did not know how much the government contributed in tax relief, though some were aware that it contributed something.
About one in 10 of the respondents did not know that their employer paid into their workplace pension, and nearly half (48 per cent) of people did not know how much their employer was paying in.
According to analysis from The People’s Pension – the second biggest master trust in the UK with more than 4m members – the increase of the minimum pension contributions under auto-enrolment to 8 per cent in April could amount to an increase of £696 for the average earner.
Over the typical saving period of 45 years, their pension pot was estimated to be £97,500 higher than if they continued to pay in the current 5 per cent contributions.
Of this £97,500 increase only £18,500 would come from the member. The remaining £79,000 was a combined result of market growth on investment, employer contributions and tax relief provided by the government, The People’s Pension stated.
Recent research from Royal London has suggested the hike in auto-enrolment contributions – from 3 to 5 per cent for the employee - will have a minimal impact due to pay rises and a more generous income tax system.
Gregg McClymont, director of policy at The People’s Pension, said: "It's encouraging that the vast majority of people see the positives of saving into an auto-enrolment pension, but as we head towards April’s increases, there’s work to do to ensure savers are getting the full picture.
"This year’s contribution increases should see people saving thousands more, allowing them to live more comfortably in retirement.
"There is always a risk that people may choose to stop contributing if they aren’t aware of the advantages that saving into an auto-enrolment pension brings.
"At a time when millions of people in the UK will be under-pensioned if they rely just on the state pension, getting this message across is crucial."