Majority of workers are unaware of changes to pensions tax relief

Almost eight out of 10 people (77%) don’t know about Government changes to tax relief that will reduce the maximum amount a person can contribute to their own pension, a survey by Close Asset Management Limited has found.

From April 2011, the annual allowance for tax-privileged pension saving will be reduced from £255,000 to £50,000. This move is expected to affect more than 100,000 pension savers, particularly those who earn in excess of £100,000.

The research revealed that more than one in three employees (36%) were anxious to find out more information on retirement planning yet financial education is in short supply. Eight out of 10 (83%) said they have not been offered any form of advice or information by employers. This means many employees (40%) are obliged to look to Independent Financial Advisers (IFAs) for financial advice about saving for their retirement and many more could remain ignorant of the facts.

Although many of the connotations surrounding the new government legislation are negative, there are also a number of benefits, such as the carry forward rule. Many people are unaware of these benefits and as a result a level of education and support is needed.

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The carry forward rule, amended in October 2010 means that many people with pension pots in excess of £50,000 can carry forward any annual allowance that has not been used from the previous three tax years to the current tax year. The complexities that surround these allowances and the deadlines by which they need to be exercised often require expertise and planning advice.

Jeanette Makings, Director – Financial Education Services for Close Asset Management, said: “The changes in the pension tax rules highlight the importance of providing financial education to employees and giving them access to professional, specialist planning advice. For us, financial education is not just a marketing tag line, it means providing targeted support to help individuals to make real differences to their own financial wellbeing. Without this support, employees may lose out to the tax man and are also unlikely to make the most of the benefits provided to them by their employer. ”