HIGH earners across the country are failing to claim back their full tax relief on pension contributions in an "astonishing" lack of awareness of their entitlements.
Research found nearly six out of 10 higher rate taxpayers – those on salaries between £44,871 and £160,500 – are not cashing in on the full incentives made available by the Treasury to encourage saving for life after work.
Financial giant Prudential said the unclaimed tax relief could be worth an additional £1020 every year to a higher rate taxpayer – with potentially £295.8 million going unclaimed every year.
The research also showed fewer than one in five (19%) higher rate taxpayers knew whether they had claimed tax relief or not, while 22% said they did claim all the pension tax relief to which they were entitled.
While the standard 20% tax relief is automatically taken from income at source, those in the 40% tax bracket have to contact Her Majesty's Revenue and Customs (HMRC) to arrange a claim.
Alan Steel, of Alan Steel Asset Management, said he was "astonished" by the figures.
Mr Steel, who is based in Linlithgow, said: "The figures would suggest these people don't have advisers and it just beggars belief. Having been a higher rate tax payer for a number of years, I wouldn't dream of not claiming the tax relief, which is a relatively simple thing to do. I can't imagine why people would turn their backs on a couple of thousand pounds."
According to HMRC, 55% of the estimated 900,000 higher rate taxpayers in the UK contribute to defined contribution pension schemes.
Their average salary is £51,580 with contributions of around £425 each month, according to figures. Basic rate 20% tax relief is worth £85 on a monthly contribution of £425. The additional 20% relief available for higher rate taxpayers is worth another £85 a month, Prudential said.
The missed payments will affect those on personal pension schemes and group pension schemes with some on occupational pensions seeing their higher rate deducted automatically at payroll.
Prudential urged those affected to act now and claim any missed tax relief dating back from 2008/09.
Matthew Stephens, Prudential's tax expert, said: "It's astonishing so many people fail to claim this valuable tax relief, which could help enormously in meeting the cost of retirement. Surely no-one would knowingly turn their nose up at a potential £1020 extra tax saving?
"The good news is that it's possible to claim backdated tax relief, for up to three years for those who don't need to complete a tax return, and this money could make a large extra contribution towards their pension fund.
"Our research figures demonstrate clearly a majority of higher rate taxpayers could take immediate steps towards boosting their retirement pot."
Jeffrey Deans, of Save and Invest independent financial advisers in Glasgow, said: "We all have that 'I'll get round to it syndrome' and we all have to work at a greater pace now.
"I can believe people are heading into company pension schemes who then think there is no need to go to anyone to get professional advice."
l If you want to find out more about tax relief on pension contributions, call the HMRC helpline on 0845 300 0627. Or log on to www.hmrc.gov.uk
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