Tax benefits of stakeholder pensions ignored

The majority of Britons do not realise the tax incentives attached to stakeholder pensions exist, new research shows.

Figures from B&CE Benefit Schemes, a not-for-profit provider of the most popular stakeholder pension scheme in the UK, show some 52 per cent of working Britons do not know about the tax benefits offered on pension savings.

And this rises to 65 per cent of under 34-year-olds, almost two people in three, and 70 per cent of workers under 24.

But the advantages of putting money into pensions are considerable.

People putting money into personal pensions or stakeholder pensions are given their income tax back on these contributions.

This means someone paying basic-rate income tax of 22 per cent has 28 per cent added onto their pension contributions by the government, while someone paying higher-rate tax is given 67 per cent extra - up to a limit of at least £2,808 a year.

In practice, this means for every £78 contribution you make you will get £22 extra added to it by the government for a basic rate tax payer and £52 added to it for a higher-rate tax payer.

"It is surprising how many people are unaware of the tax breaks on pension saving," said John Jory, deputy chief executive of B&CE Benefit Schemes.

"Our results indicate that there is still a lot of work to be done in getting across the message about the tax advantages in saving for a pension."