UK missing out on £2.7 Billion of pensions cash (Consumer)

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• More than one in five (or  over 2.4million)* pensioners are not claiming pension credits
• Up to £2 billion** worth of pension credits will go unclaimed this year
• Whilst the UK’s retirement savers squander £739 million* in unnecessary tax payments

In the throes of the well-documented UK pensions saving crisis, research from Unbiased.co.uk, the find an independent financial adviser search, has revealed that as much as £2 billion of pension credits will remain unclaimed this year. 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% and 25% of pensioners failing to realise their entitlements*, this valuable source of income is being wasted by many retirees.

And what is more, working people in company pension schemes are also missing out on huge sums by neglecting to save in 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 the 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 comments: “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 any 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.  A discussion with a local IFA is a great place to start this process.”

As a first step to stamping out this waste, visit Unbiased.co.uk’s dedicated website at www.unbiased.co.uk/taketaxaction.  The site contains tips on how to save tax, an online tax wastage calculator, and a guide to saving tax. You can also find details of local IFAs on the site or by calling 0800 085 3250.

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* ONS figures show there to be 11 million pensioners in the UK.   Up to 22% are not claiming pension credits – or 2.42 million.

** TaxAction 2007 report produced for IFA Promotion by RAKM, based on a specially commissioned analysis of Inland Revenue and a range of other official data sources.  

Tax doesn’t have to be taxing – Here are 10 basic ways to claw back some of the waste: