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Pension savers let millions in tax relief go begging

People who save for their retirements through company pension schemes could be missing out on millions of pounds in tax relief, a new study has claimed.

According to the research, by Unbiased, a professional advice website, higher-rate taxpayers are failing to take advantage of £720 million of tax relief each year because they are neglecting to make additional voluntary contributions.

Additional voluntary contributions enable savers to add extra sums to their pension funds and come with tax relief. Although the relief is capped at 100 per cent of a saver’s earnings and by an annual allowance of £240,000 for this tax year, many people are not using the relief.

Unbiased estimated that almost four out of five higher-rate taxpayers (78 per cent) do not make additional voluntary contributions to their pension funds. This is the equivalent of £1,650 annually for each saver.

David Elms, Unbiased’s chief executive, said: “Failing to save for retirement has become an increasing problem for the UK population. The onset of the credit crunch has further compounded this problem as the value of people’s pension funds is decreasing and they are also finding their money doesn’t go as far as it used to.”