One in four higher rate taxpayers do not contribute to pension schemes despite the attraction of tax relief to help boost their retirement savings, research from Prudential has revealed.
Higher rate taxpayers are missing out on £438 million of tax relief each year because they are failing to pay into a pension, it said.
According research from Prudential 216,000 employees earning between £42,275 and £149,999 do not pay into a pension scheme. Over 20% of those without a pension claimed they could not afford the contributions.
Around 13% said they did not see the point of saving for retirement while 17% did not know why they were not saving. Around 43% claimed to have made alternative retirement arrangements while 4% have existing Sipps and another 2% claim they will not retire.
Matthew Stephens (pictured), Prudential’s tax expert, said: ‘Pension saving offers valuable tax reliefs to all workers and particularly to 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. The good news is that it is never too late to take action on saving for retirement and we urge all workers to seek advice on long-term retirement planning.’
The research showed 2010 reforms limiting tax-free pension contributions to £50,000 a year had not been a factor in putting high earners off pension saving. Only 8% said the change had deterred them from pension saving, while 25% were unaware of the change.