Archived article: This article was correct at the time of publishing. Tax, investments and pension rules can change over time so the information below may not be current.

Financial Planning

Pension contributions – are you missing out on free money?

The tax benefits of pensions are one of the reasons they are such a great option for saving towards retirement. You don’t pay Income Tax or Capital Gains Tax on your pension investments, and the Government also gives you tax relief on your pension contributions.

The Government tops up your pension contributions

Anything you pay into your pension will be topped up by the Government, up to your annual allowance (usually £40,000). Everyone receives basic-rate tax relief of 20% – so a gross contribution of £1,000 would only cost you £800.

Higher and additional-rate taxpayers can then claim back a further 20% or 25% respectively – bringing the total cost of a £1,000 contribution down to as little as £550.

A big difference to your investment returns

The effects of this initial tax relief can be amplified over time if we consider your investment returns. Let’s assume that you paid £800 into your pension and received basic-rate tax relief, bringing the total contribution up to £1,000.

If your investment grew 10% in a year you would have £1,100. If you didn’t get tax relief – for example by paying the money into an ISA instead – you would have £880 and be £220 worse off. Over the course of a long-term investment like a pension, this can make a huge difference.

16 million people are unaware of tax relief on pension contributions

Clearly this top up to pension contributions can make a big difference to your savings over time, and yet many people are unaware of it. Research from Blackrock has revealed that a massive 16 million British people were in the dark when it comes to pension tax relief*.

This isn’t a new issue either. The Government’s consultation on altering pension tax relief has previously highlighted the fact that many Brits weren’t aware of the benefits. This begs the question – how much tax relief has potentially been missed out?

Speak to a financial planner about your retirement savings

Tilney’s financial planners spend their days helping people with their retirement planning and wider finances. They can give you advice on:

  • How much money you may need in retirement, and whether you are on track to achieve this
  • Making the most of your allowances and using pension carry forward
  • Protection against the pension lifetime allowance tax charge

To find out what they could do for you, please book a no-obligation consultation by completing this online form, calling us on 020 7189 2400 or emailing

Important information

*Blackrock’s 2017 Investor Pulse survey.

Please note we do not give tax advice.



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Mixed UK employment data – weekly update 17 July