Anyone who decides against investing in a workplace or personal pension, also turns down help from the government. And that’s because in order to encourage people to save for retirement, the government provides a top up called tax relief to your pension payments.
How you receive tax relief depends on the type of plan you have and the rate of income tax that you pay.
But as an example, if you are a basically taxpayer saving into a personal pension in the current tax year, you will get 20% tax relief on your payments.
So if you pay £200 a month into your pension plan, the £40 of tax relief you receive on that payment, means it will only cost you £160.
High rate or additional taxpayers can claim back even more.
Some workplace pension schemes, offer tax relief in a different way, such as through salary sacrifice or exchange schemes. So check with your employer if you’re not sure how this works for you.
And in Scotland tax relief details differs slightly, but in all these cases, the general point is the same. Each time you defer paying into a pension plan, you miss out on an extra boost of tax from the Government.