Retirement news

UK missing out on pension billions

7 August, 2007

Pension credits are a government entitlement for people aged 60 or over, guaranteeing them an income of at least £119.05 a week.

But with between 20 per cent and 25 per cent of pensioners failing to realise their entitlements, this valuable source of income is being wasted by many retirees.

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In the throes of the well-documented UK pensions saving crisis, the research from Unbiased.co.uk, the find an independent adviser search, also revealed those people in company pension schemes are missing out on huge sums by neglecting to save tax-efficient ways.

In fact, high-rate taxpayers that are covered for their retirement by a company pension scheme will gift an unnecessary extra £739 million to the tax man this year by failing to make Additional Voluntary Contributions (AVCs).

AVCs are there to help increase the value of pension funds by allowing employees to make ‘top up’ payments from their salary, which will lead to a larger pension pot at retirement. AVCs are subject to the same tax relief as any standard contribution and it is important people make use of this tax-efficient way of saving for their retirement.

David Elms, chief executive of Unbiased.co.uk, said: “Our lack of saving for retirement remains a crucial problem for the UK and those that are in a position to save more should be doing so. However, it seems that people are compounding the situation – be it through apathy or confusion – by failing to claim vital sources of retirement income in the form of tax credits. Likewise, retirement savers are not making things easier for themselves by overlooking the need to top-up their company pension pot.

“No-one likes paying more tax than is necessary, and no-one likes missing out on something that is rightfully theirs, so we are urging people to either kick-start their pension and tax planning or review their current situation with urgency.”