Taxpayers miss out on pensions

The Northern Echo: PUBLIC PROTEST: A woman marches in Edinburgh last year in protest at pension cuts PUBLIC PROTEST: A woman marches in Edinburgh last year in protest at pension cuts

By Harry O'Connor
Wealth management consultant
Pearson Jones PLC

MANY people will be surprised by research which shows that many UK higher-rate taxpayers do not save into a pension.

Independent research for Prudential says that one-infour higher-rate taxpayers do not contribute to pension schemes in spite of the benefit of tax relief that could provide them with an additional average top-up to their pension of £2,040 a year.

This represents about 216,000 taxpayers missing out on up to £440m a year, which could boost their retirement savings.

According to the research, the average higher-rate taxpayer earns £58,541, but, in spite of this, 21 per cent of those questioned claimed they could not afford to contribute to a pension scheme.

Of those who do not save into a pension, 13 per cent said they do not see the point of investing for retirement, in spite of tax relief, while 17 per cent did not know why they fail to do so.

Revenue and Customs figures show that about 58 per cent of an estimated 900,000 UK higher-rate taxpayers contribute to defined contribution pension schemes and another 15 per cent are in either noncontributory or defined benefit schemes. But, despite average salaries of £58,541, the remaining 27 per cent do not save into pension schemes at all.

About 43 per cent of those who do not save into a pension say that they have alternative retirement plans, four per cent have existing Self-Invested Personal Pension schemes and another two per cent say they will not retire.

The younger you start saving for retirement, the better. Those who start in their 20s need save only a relatively modest proportion of their income to build a decent fund.

If you are older and have not started, you can still start, even in your 50s or 60s.

Whatever your age, if you are planning to start a pension, speak to an independent financial advisor.

  • Harry O’Connor, Pearson Jones plc, Bank Chambers, 9 Kensington, Cockton Hill Road, Bishop Auckland , DL14 6HX, Call 01388-458919.

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