Higher rate taxpayers in employer’s occupational pension schemes are potentially losing out on an additional £795 million in unclaimed tax benefits, warned adviser referral website Unbiased.com.
The research conducted by the website found by not making Additional Voluntary Contributions (AVC) to employers’ occupational pension schemes, savers’ ‘generous tax relief’ is lost. Some 482,000 higher tax payers could reclaim £1,650 each by making AVC, the report found.
The above number does not even consider the new taxpayers who fall into the new 50 percent ‘super tax’ bracket.
Employees can make additional payments alongside their employers’ occupational pension schemes through AVCs, which will result in bigger pension pot at retirement.
AVCs enjoy the same tax benefit as contributions paid into the main pension scheme and if AVCs are deducted directly from employees’ pay, even at higher rates the tax benefits can be immediate.
However, higher and super rate tax payers can also claim back the difference between the rate they paid and the 20 percent rate via the HMRC, observed Unbiased.
The products available in the retirement market has expanded and savings products are ‘fast changing’, giving rise to multiple options to savers looking to plan for finances after retirement, observed Karen Barrett, chief executive of Unbiased.
“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 per cent or 50 per cent to your retirement savings” she added.
“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, she rued.
“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”, she observed.