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Tax relief could boost consumers’ savings by £5.5bn

Around three quarters of potential UK investors are not taking advantage of tax relief from a personal pension and they are losing out on £5.5bn per year as a result.

Research from Scottish Widows shows that 18m investors are not putting their savings into a personal pension and therefore are not getting tax relief on their investments.

Scottish Widows has calculated that if consumers saved just £100 a month, the taxman’s contribution could add £27,000 to a person’s retirement fund

Two fifths of UK residents who are considering financial investments are unaware they can receive tax relief from personal pensions.
 
The research reveals that, of those who would consider financial investments, only 19 per cent of basic rate taxpayers and 37 per cent of higher rate taxpayers contribute to a personal pension plan.
 
Of those that are saving in a personal pension, the average basic rate taxpayer saves just £74 a month, whilst the average higher rate taxpayer saves £145.  
 
If the 18m potential UK investors not already doing so started to save £100 a month in a personal or stakeholder pension, the total contribution from HMRC would be £450m per month or £5.5bn per year.     
 
Scottish Widows head of pensions market development Ian Naismith says: “Our research shows that many UK tax payers aren’t taking advantage of the tax-breaks available through saving in a personal pension scheme.  Many do not realise the tax advantages of pensions, or that you can pay into a personal pension as well as into your employer’s scheme.”
 
“Saving in a pension makes sense because the taxman gives you money. The UK as a whole is seriously undersaving for retirement and our calculations shows that the typical saver’s retirement pot is significantly boosted by the money they could get back from Her Majesty’s Revenue and Customs. Any boost to retirement savings should be welcomed with open arms and could help bring people closer to the levels they should be saving in order to enjoy a comfortable retirement.”

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