Half of DC contributors don’t know about tax relief on workplace pensions
Almost half of defined contribution (DC) savers didn’t know they get tax relief on their workplace pensions, according to a survey by TPT Retirement Solutions.
The study found that a “concerning proportion” of pension savers didn’t understand the two crucial components of workplace pensions: tax relief and contribution levels.
The pensions company found that almost one in two (46%) savers weren’t aware they receive tax relief on their contributions, while more than six in 10 (62%) people are not making use of higher employer contributions eligible to them.
The research, which polled around 1,500 DC savers, shows that 46% of people are not aware they receive tax relief on their contributions, essentially money from the Government that you can claim when saving into your pension.
Another big issue is a lack of understanding of how workplace contribution levels work. Almost one in five (24%) DC savers were unaware that they can change their contribution levels. Meanwhile, almost two-thirds (62%) of DC savers who are eligible for a higher employer contribution once they opt in are only receiving the minimum amount. A further 9% are unaware that their employer is contributing to their pension.
More engagement needed
TPT Retirement Solutions said the findings suggest a need to further engage people on how DC pensions work, and on how to get the most out of your workplace pension.
Philip Smith, DC director at TPT Retirement Solutions, said: “DC pensions put responsibility for a member’s financial future firmly in their own hands. Helping people understand how workplace pensions work is therefore essential.
“If we want savers to take an active role in their retirement planning, it’s imperative that employers and all trustees provide them with the right information, tools, and support to enable them to make informed decisions.”