Many higher rate taxpayers do not contribute to a pension scheme

One in four higher rate taxpayers do not contribute to a pension scheme, according to research by Prudential.

Nationally, this means 216,000 employees are missing out on up to £438 million per year in pension tax relief.

According to the study, of those earning between £42,275 and £149,999,  21% say they cannot afford to contribute to a pension scheme, 13% cannot see the point of saving for retirement and 17% had no explanation for why they do not contribute to a scheme.

The research also found:

  • 43% of those who do not save into a pension scheme say they have alternative retirement arrangements.
  • 4% have existing self-invested personal pension schemes.
  • 2% claim they will not retire.

Matthew Stephens, tax expert at Prudential, says: “Basic rate 20% tax relief is available at source plus 20% from HM Revenue and Customs for higher rate taxpayers. Turning down what is effectively free money simply does not make sense.

“It is worrying that so many higher rate taxpayers say they cannot afford to save into a pension despite earning healthy salaries.’

Read more articles on higher rate tax.