Product category:
Protection
News Release from: Scottish Widows | Subject: Protection
Edited by the Insidemoneytalk Editorial
Team on 10 September 2007
UK tax payers could boost their savings
by £5.5 billion per annum
Just over three quarters of potential UK investors (18.75 million) are not taking advantage of tax relief from a personal pension
If you saved just ?100 a month, the taxman's contribution could add £27,0005 to your retirement fund Two fifths of UK residents who are considering financial investments are unaware they can receive tax relief from personal pensions Research published today by Scottish Widows reveals that a staggering three quarters of potential UK investors are not taking advantage of tax relief from a personal pension Of every pound you save in a pension, Her Majesty's Revenue and Customs (HMRC) gives a basic rate taxpayer 22p and a higher rate taxpayer 40p
This article was originally published on Insidemoneytalk on 23 Apr 2007 at 8.00am (UK)
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The research reveals that, of those who would consider financial investments, only one in five (19%) basic rate taxpayers and one in three (37%) higher rate taxpayers contribute to a personal pension plan.
This means that over 18.752 million UK tax payers could receive free money from the taxman if they opened a personal pension.
Of those that are saving in a personal pension, the average basic rate taxpayer saves just £74 a month, whilst the average higher rate taxpayer saves £145.
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If the 18.75 million potential UK investors not already doing so started to save £100 a month in a personal or stakeholder pension the total contribution from HMRC would be £450 million per month or £5.5 billion per year4.
Ian Naismith, head of pensions market development at Scottish Widows, says: "Our research shows that many UK tax payers aren't taking advantage of the tax-breaks available through saving in a personal pension scheme".
"Many do not realise the tax advantages of pensions, or that you can pay into a personal pension as well as into your employer's scheme." The money you receive from HMRC makes a significant difference to the eventual pension pot you have to fund your retirement.
A typically basic rate tax payer with a pension contribution of £100 a month from age 30 to age 65 could have their pension fund boosted by £27,0005 as a result of the tax relief - with the figure reaching £54,000 for a higher rate tax payer.
Naismith continues: "Saving in a pension makes sense because the taxman gives you money".
"The UK as a whole is seriously undersaving for retirement and our calculations shows that the typical saver's retirement pot is significantly boosted by the money they could get back from Her Majesty's Revenue and Customs".
"Any boost to retirement savings should be welcomed with open arms and could help bring people closer to the levels they should be saving in order to enjoy a comfortable retirement." Worryingly, the research reveals that 40 percent of UK tax payers are unaware that they can receive tax relief from pensions.
To access Scottish Widows' new online guide to pensions and tax calculator, go to www.scottishwidows.co.uk/guide and www.scottishwidows.co.uk/tax-relief.
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