Pension tax efficiency ignored by millions
Monday 19th March 2012
More than a third (35%) of people in the UK aged 18 to 65 who are not actively investing in a pension say that they would be likely to invest an average of £159.60 each month into a long-term savings product that "added an extra £1 to every £4 invested" if such a product existed.
But according to Standard Life's Financial Efficiency research, over three in four people aged 18 to 65 who are not currently investing in a pension are totally unaware that this benefit is already available from a pension.
If over a third of people who are not actively investing into a private pension did start to invest an average £159.60 a month, their total pension investment would increase to £199.50 a month when basic rate tax is added. If this was invested from age 30 into a pension, it could result in a sizeable pension pot of £144,635 in today's money by age 67. This could help to close the savings gap and tackle concerns about long-term financial security.
According to the Pensions Policy Institute, 61.5% of people in the UK do not invest in a private pension, which equates to over 24 million people in the UK. If over a third of them started to invest £159.60 a month, this could add up to over 8.6 million more people saving an additional £20.6billion in total towards retirement each year, assuming they are basic rate tax payers.
John Lawson, Head of Pensions Policy at Standard Life, said: "I don't think we should be too surprised to learn that many of those people who aren't actively investing for their retirement are still unaware of the tax benefits of a pension. Clearly there is still a job to be done, to help educate people on the benefits of tax efficient products like pensions and ISAs so they can make the most of them.
"But it's very reassuring to know that those who aren't actively investing in a pension at present would think again if they understood just how tax efficient a pension can be. It shows that the tax relief on pensions is an important incentive and can help encourage those who aren't investing for their later years to take control of their future finances."
Have your say on this story using the comment section below
blog comments powered by Disqus
Editorial Contact Details - Conor Shilling