You are here: Home - Retirement - Retirement planning - News -

Pension investors could receive £25bn in tax relief this tax year

Written by: Danielle Levy
Income tax relief claimed on pension contributions is set to soar by 40% between 2014 and 2019, according to analysis by NFU Mutual.

The financial advice firm also calculated that pension investors are on course to receive a total of more than £25bn in tax relief during the 2018-19 tax year.

This relief is effectively a refund of the tax you paid on your earnings and means that basic rate taxpayers – who receive 20% relief – only need to pay £80 to invest £100 into their pension pot.

Higher rate taxpayers receive tax relief of 40%, while additional rate taxpayers get 45%.

Sean McCann, chartered financial planner at NFU Mutual, said: “Phillip Hammond described tax relief on pensions as ‘eye wateringly expensive’ and it’s almost certainly going to remain in his sights for some time. We could see some changes announced before the end of 2019.

“The multi-billion-pound surge in cost will partly be due to the roll out of automatic enrolment, where employees are added to workplace pension schemes by default. While pension contributions are typically low, the sheer numbers involved will have made a difference.”

He also highlighted the pension freedoms as a factor behind the increase. These rules were introduced in 2015 and allow individuals who are aged 55 and over to spend or invest their pensions as they wish.

“Savvy savers in their 40s, 50s and beyond are now using pensions as an alternative to a stocks and shares ISA because of the tax breaks. Anyone can access their pension from age 55 and the tax relief on contributions for higher rate taxpayers in particular makes this a very tax efficient option,” McCann added.

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

DVLA is warning motorists to be aware of these scams

Motorists are being urged to look out for cons being used by scammers to trick them into handing over their mo...
DVLA is warning motorists to be aware of these scams

Millions of Sky customers face £36 bill hike

Sky TV and broadband customers will see bills rise by an average of £36 a year from April, the telecoms giant...
Millions of Sky customers face £36 bill hike

Klarna users charged on ‘fee-free’ spends

Klarna shoppers have been stung with fees using their credit cards under the interest-free buy now pay later o...
Klarna users charged on ‘fee-free’ spends

Ryanair jetting towards US flights for £10

Ryanair is on course to achieve its long-held ambition of offering transatlantic flights to the US – and the...

Investing in car parks: a good vehicle for income seekers?

As the search for income continues, many investors are turning to alternatives, with car parks becoming increa...

A quick guide to guarantor loans – in association with Guarantor Loan Comparison

Considering a guarantor loan or becoming a guarantor yourself? Read our essential guide...

Results round-up: Companies to watch this week

Mulberry and more will face the music this week.

Product launches of the week

Select Property Group, Schroders, Leeds Building Society and more have exciting news this week.

Money Tips of the Week

Read previous post:
IT meltdown costs TSB £330m

Close to 80,000 customers left TSB last year following its high profile IT crisis.