Those paying the higher rate of tax and contributing to a personal pension should ensure they are claiming back all eligible tax from HMRC, while checking their pension provider’s fees to see whether they could be getting a better deal elsewhere.
For those able to invest the maximum tax-free amount per year (100% of someone’s salary or £60,000, whichever is lower), including claiming the maximum amount of tax relief, with a pension fund growth of 7% per year, they would end up with £1.6m after 40 years.
But if they were to claim additional tax relief on any money taxed at the higher rate through a self-assessment tax return, this could equate to an additional £1,200 per year.
In this scenario, the pension scheme will automatically collect the 20% basic rate of tax relief from HMRC and add it to the individual's pension.
This includes considering the power of making additional contributions to their pension where possible, which would get them further tax relief and boost their overall retirement fund.
