£1.3bn lost to unclaimed pension tax relief

Britons have lost out on £1.13bn of tax relief in the five years to 2020/21, according to Hargreaves Lansdown. Savers can claim tax relief on their pensions at their marginal rate, but often may need to claim on their tax return to get the full amount they are entitled to. Basic rate tax relief will usually be added to contributions automatically (if the pension scheme is set up under a relief at source arrangement), but higher or additional rate taxpayers may need to claim the extra 20% or 25% tax relief through self-assessment. Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, said: “Avoiding pension pitfalls is key to making the most of your retirement planning. Claiming the tax relief you are entitled to sounds like it should be a given, yet £245 million a year remains in the Government’s coffers on average. “Similarly, losing track of an old pension can leave you far worse off in retirement. Even the smallest pensions can grow and over time you could be missing out on a significant chunk of savings. Life is busy and it is easy to put things off, especially when retirement may feel like it’s a long way away but giving your retirement plans an annual dust off and taking small actions on a regular basis will be something that your future self will surely thank you for.” The tax relief could make all the difference to retirement savers. A separate report from retirement adviser Just Group found that 27% of those born between 1965 and 1980 are not confident of paying off their mortgage before the age of 67. Double the number of Gen X (26%) London residents with a mortgage said they did not expect to repay their mortgage before 67, compared to the national average of 13%. The growing cost of borrowing appears to be contributing to these repayment fears: nearly half (45%) of Gen X who have a mortgage said that it was taking them longer to pay it off than they had hoped. When asked why, the most common reason (34%) was that they had needed to extend the mortgage term to reduce monthly payments. Just Group surveyed 1,057 Gen X workers in August 2023.

£1.3bn lost to unclaimed pension tax relief

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