High earners overlook pension tax relief

One in 10 higher rate taxpayers are missing out on pension tax relief worth £2,500 a year, a survey by Prudential has found.

The survey of 302 higher rate taxpayers found that 10% do not make a personal contribution to a pension.

The research also revealed that:

  • the average annual salary for higher rate taxpayers is £63,000
  • those who do make monthly contributions contribute 10% of their salary – or £523
  • pension tax relief on a £523 monthly contribution is worth £209.24 to a higher rate payer
  • this is a boost to their pension pot of just over £2,500 per year.

With an estimated 900,000 higher rate employee taxpayers in the UK, those who do not make additional contributions to their defined contribution workplace schemes are missing out on a collective £225 million per year in unclaimed tax relief.

Prudential’s tax specialist, Clare Moffat, said:

“Saving into a pension offers valuable tax relief to all workers and particularly to higher rate taxpayers. With a lower threshold for higher rate tax more people stand to benefit from extra tax relief on pension contributions.

“A career spent earning a relatively high income doesn’t guarantee a comfortable retirement. It’s easy to see how pension contributions can be overlooked. But the good news is that it is never too late to take action and to start saving as much as possible.”

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