Brits are set to save an additional £1bn in tax relief during 2016 thanks to the increased take-up of workplace pension schemes via auto enrolment.
TaxAction 2016, a collaboration between Prudential and unbiased.co.uk, revealed that the amount of lost tax relief will reduce to £1.9bn in comparison to last year, which saw 8.7million people failing to pay into their pension schemes and wasting around £2.9bn in lost tax relief.
It is estimated that 7 million Brits still do not have a pension scheme and are effectively losing out on around £568 per year (down from £698 in 2015).
Commenting on the data, Les Cameron, Head of Technical at Prudential described the overall situation as 'encouraging', with more people saving into workplace pensions.
"Making pension contributions is one of the easiest and most efficient ways for people to reduce their tax liability so it's encouraging that more people are now saving into workplace pensions," he said.
But Sarah Hamilton, senior DC consultant at Aon Employee Benefits, warned that whilst the statistics indicate the on-going success of auto enrolment due to the high numbers enrolled in pension schemes - with many more set to be enrolled as more small and micro employers reached their staging dates - many companies were actually 'down-sizing' contribution rates to the minimum spend. She said: "This, coupled with the lack of engagement and understanding by many employees is pushing down average contribution rates. There is a danger of employees being left disappointed with the size of their retirement savings when they come to retire."
Indeed, the research found that despite the increase in people making pension contributions for this year, the annual average contribution rate is significantly lower than 2015 where the average annual contribution was £3,490 compared to £2,840 for this year.
Hamilton added: "Helping individuals to understand the tax benefits of saving into a pension scheme is essential and this help needs to come from various sources, including the Government and employers."
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