Savers misunderstand pension tax relief

Two thirds of people don’t understand pension tax relief according to a survey by Aviva.

However, the research shows that understanding of has increased since the pensions reforms, especially among people aged over 55.

Important findings:

  • 10% have never heard of pension tax relief
  • almost 50% think the language used to describe pensions is unclear
  • 12% believe their understanding of pensions has improved since the pensions reforms.

At present savers can receive tax relief at their marginal rate on pension contributions of 100% of earnings or £40,000 a year (whichever is lower). It is possible to carry forward unused allowances from the previous 3 years, provided you have been a member of a pension scheme for those years.

Andy Briggs, CEO UK & Ireland Life at Aviva, said:

“It is a worry. A pension can be one of the biggest investments a person makes in their life.

“If they don’t understand the incentive to save that is being offered then this needs to be changed.

“It’s no wonder many people question the value of saving into a pension when two thirds admit they have very little understanding of the current system of pension tax relief.”

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