High earners risk losing over £255,000 in unclaimed pension tax relief – Rathbones

More than 100,000 earners could be missing out on over £255,000 in pension tax relief, according to new research from Rathbones. 

The report found that workers earning between £100,000 and £125,140 lose an extra 40% tax relief if they do not reclaim through their self-assessment tax return. 

Missing this can cost £5,000 in a year, £89,666 over 10 years and as much as £255,358 over 20 years if the relief is not reinvested and pension contributions rise by 2% each year with 5% annual growth.

If investment returns were higher, at 7% net, the lost pension wealth would increase to £100,066 over 10 years and £318,825 over 20 years. 

Higher rate taxpayers who reclaim the extra relief could see their pension pot boosted by £2,500 in a year, £44,833 over 10 years and £127,679 over 20 years. 

For additional rate taxpayers, the boost could be £3,125 in a year, rising to £56,041 over 10 years and £159,599 over 20 years.

Ed Wood, senior financial planner at Rathbones, said: “Earning just above £100,000 puts people in one of the most punitive tax positions in the UK – but it also creates an opportunity. 

“By giving up a small slice of heavily taxed income, individuals can not only stay eligible for important childcare support but also supercharge their retirement savings.