A new study carried out by Standard Life made the following plea to UK workers: “If people understood the tax efficiency of pensions, more would save for their retirement”.
Standard Life’s ‘Financial Efficiency’ research found that up to 77% of Brits aged 18 to 65 years old -who are not actively contributing to their future pension- actually ignore the numerous benefits of investing in a pension. This includes the fact that an extra £1 could be added for every £4 invested.
As the study makes clear, one of the top reasons for the lack of consumer inactivity over pensions is ignorance.
In fact, 35% of Brits aged 18-65 said they would happily contribute into a pension by adding an average of £159.60 each month, if that plan allowed them to earn an extra £1 for every £4 invested.
As the report explained, Brits investing in the above plan would see their monthly sum increase to £199.50 a month when basic rate tax is added. As a result, a person who starts investing in this particular pension plan from the age of 30 would enjoy a pension pot of £144,635 by the time they reach the age of 67.
“A job to be done”
“I don’t think we should be too surprised to learn that many of those people who aren’t actively investing for their retirement are still unaware of the tax benefits of a pension. Clearly there is still a job to be done, to help educate people on the benefits of tax efficient products like pensions and ISAs so they can make the most of them,” said John Lawson, Head of Pensions Policy at Standard Life.
Lawson stressed that it’s very reassuring to know that those who aren’t actively investing in a pension at present would think again if they understood just how tax efficient a pension can be.
Since UK retirees are the ones suffering from a higher inflation, counting on a reliable pension pot for your later years would give pensioners peace of mind.