New research undertaken by YouGov has found that nearly three quarters of working people are unaware of, or don't understand the tax benefits of saving into a pension.
Had they been aware of the tax-relief on contributions, around half of those surveyed said they would have upped the monthly amount saved away.
The research again raises questions about the current system, and how well marketed it is; incentives are effectively pointless unless clear and understandable for all.
Pension Tax Relief
It seems that most surveyed were unaware that the government bumps up contributions depending on your tax bracket. For example if a basic rate taxpayer want to put £300 into their pension pot, it only actually costs £240, as the government would put the other 20%.
Higher rate taxpayers get an even better deal. For the same 'bump' (£300), it would only cost them £180, as additional the £60 government bump, they can also claim a further £60 via their end of year tax return.
Make no mistake, with careful management over a full working life, the use of pension related tax-relief can make a significant difference to the size of your final pension amount.
If your under employment, your employer is lawfully bound to offer a workplace pension for each employee. Some people don't realise that your employer is also obligated to contribute partly to your pension – which is effectively free cash, however you're not entitled to if you don't take advantage of your workplace pensions scheme.
Over the last couple of years, the government has recognised the danger of future generations not having enough assurance for retirement, and as such has introduced an auto-enrolment programme. With it employers are legally required to set up a pension for their employees, to start making contributions.
You're entitled to opt out of course, but it is advised against unless you have other sources of pension in place. If you're reason for opting out is due to financial difficulty, there may be some other ways you can save cash such as lifestyle or habitual changes. For more help with this please refer to our dedicated guides on budgeting.