People with a pensions pot have been urged to come forward for money which is “rightfully theirs”. Ahead of the HMRC self assessment deadline on January 31, Gary Smith, a financial planning partner and retirement specialist at Evelyn Partners, has spoken out.
He said: “Pension tax relief is the outstanding benefit of the UK’s private pension saving system – it’s one of the main reasons advisers encourage most people who can afford to, to save into a pension. So it’s important that savers who take up this opportunity don’t shoot themselves in the foot by neglecting to collect the great benefits on offer.”
Research from PensionBee in 2023 indicated that hundreds of thousands of higher and additional taxpayers are failing to claim approximately £250million each year in pension tax relief. Mr Smith warned: “Many savers completing tax returns are so focused on making sure they are not caught out by HMRC for under-reporting taxable income or assets, that they forget to collect pension tax relief they are owed and lose out on a substantial rebate.
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“Others have no other reason to get involved in self-assessment, but they need to remember that they might have to for this purpose – although it is possible to claim back tax relief without having to complete a tax return.”
He added: “By not claiming back tax relief that they are entitled to on pension contributions already made, higher and additional rate taxpaying savers could be sacrificing thousands of pounds – at a time when frozen thresholds and allowances mean that millions of taxpayers in recent years have been drawn into paying a higher rate of tax on their income.”
Mr Smith said: “It might be that some employees are misled by the term ‘relief at source’, which could be taken as implying that all relief is taken care of at the point of contribution. Rather, it is in ‘net pay’ or salary sacrifice systems that relief at all levels is added automatically.”
He went on and said: “But, in any case, as a first step employees should check what sort of system their workplace scheme uses if they aren’t sure. They can specifically ask their HR people or the pension provider if all their tax relief has been added to their contributions.
“All personal pension savers meanwhile – whether it is a policy with one of the big insurers, a stakeholder pension or a SIPP – can assume they need to take action to claim back higher or additional rate tax relief.”
Mr Smith concluded: “This tax relief can be claimed on a tax return, but if you are PAYE and have no other reason to register for self-assessment, it is possible to write to or call HMRC with all the details of your contributions and the scheme you are paying into, in order to claim the extra tax relief.”