Pension savers have been urged to fill in an important form to claim tax relief that could be worth thousands of pounds a year.
Higher rate tax payers can get an extra 20 percent tax relief on their pension contributions but only if they fill in a self-assessment tax return.
A person in this situation who pays in £5,000 a year into private pensions could be missing out on £1,250 in tax relief while a person who puts in £10,000 a year could get an extra £2,500 in tax relief.
Britons need to act now as the deadline to submit a self-assessment is just weeks away, on January 31.
Alice Guy, head of pensions and savings at interactive investor, said: “Many people assume they automatically get all the pension tax relief they’re entitled to, but for higher rate taxpayers, that’s simply not the case.
“Ultimately, this is free money, and not claiming additional tax relief you’re entitled to means you could lose out on thousands of extra income each year.
“Claiming back extra tax relief allows you to further boost your long-term wealth, especially if you pay your rebate straight back into your pension.
“A higher rate taxpayer who contributes £10,000 into their private pension each year, could boost their pension wealth by up to £122,000 over 20 years by claiming a rebate and adding it into their pension (assuming they achieve five percent investment growth).”
Those who have not filled in a self-assessment can still take action to try and claim the tax relief. Ms Guy said: “If you don’t complete a tax return then you can write to HMRC to provide details of any private pension contributions during the year.
“Higher rate taxpayers who contribute to a relief at source workplace pension scheme will also need to claim the additional tax relief on their pension payments as it won’t be given automatically. You can also claim back missing tax relief for the previous three tax years as well as the current tax year.”
A person can also boost their pension pot by increasing their contributions, even by a small amount. Calculations from PensionBee found a person on a £30,000 salary who pays an eight percent monthly contribution and who is on track for a pension pot of £242,846, could boost this to £273,179 by upping their contributions by just one percent.
Becky O’Connor, director of Public Affairs at PensionBee, said: “Marginal gains theory really comes into its own with pensions.
“Small improvements in your contributions can make a huge difference to your overall pot size when you retire and the earlier in working life you make them, the better, thanks to the power of compound returns.”
The group also urged pension savers to check what amount they are on track to receive when they retire. PensionBee has a calculator tool to help a person work this out.
For the latest personal finance news, follow us on Twitter at @ExpressMoney_.
