Pension scheme members to enjoy additional £1 billion in tax relief this year
TaxAction 2016, a collaboration between Prudential and unbiased.co.uk, revealed that the amount of lost tax relief will reduce to £1.9bn in comparison to last year, which saw 8.7million people failing to pay into their pension schemes and wasting around £2.9bn in lost tax relief.
It is estimated that seven million Brits still do not have a pension scheme and are effectively losing out on around £568 per year (down from £698 in 2015).
Although the overall situation could be seen as encouraging, with more people saving into workplace pensions, the news isn't all good.
Sarah Hamilton, senior DC consultant at Aon Employee Benefits, warned that while the statistics indicate the ongoing success of auto enrolment due to the high numbers enrolled in pension schemes - with many more set to be enrolled as more small and micro employers reached their staging dates - many companies were actually 'down-sizing' contribution rates to the minimum spend.
"This, coupled with the lack of engagement and understanding by many employees is pushing down average contribution rates. There is a danger of employees being left disappointed with the size of their retirement savings when they come to retire," she said.
Indeed, the 2015 unbiased.co.uk TaxAction research found that despite the increase in people making pension contributions for this year, the annual average contribution rate is significantly lower than 2015 where the average annual contribution was £3,490 compared to £2,840 for this year.
Hamilton added: "Helping individuals to understand the tax benefits of saving into a pension scheme is essential and this help needs to come from various sources, including the Government and employers."
This article was provided by Aon Employee Benefits.
