Employees becoming more switched on to tax benefits of pensions

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pensions3More people are now aware of the tax efficiency of pensions than a year ago, according to research for Standard Life. Almost two in five people (39%) are aware that the Government automatically adds £1 for every £4 you invest in a pension if you are a basic rate tax payer* (subject to annual limits**).

The research also shows that almost half (47%) of those actively investing in a workplace pension scheme are aware of this tax efficiency.

In 2012, only three in 10 (29%) UK adults said they knew the Government added this level of ‘free’ money to pension contributions. And just 40% of those investing in any kind of private pension said they were aware of this a when similar research was carried out a year ago.

The increase in awareness has almost doubled among 18-24 year olds – 20% said they know about the tax efficiency of saving into a pension, compared to just 11% a year ago. And overall, 45 – 54 year olds were the most likely to be aware (46%).

But there continues to be a gender bias – almost half (48%) of men said they were aware of the incentives for investing in a pension, while seven out of 10 women (70%) said they were unaware.

Commenting, Standard Life’s Head of Customer Relationships, Julie Russell said:

“This jump in the number of people who understand the tax advantage of investing into a pension is really positive news. There’s still work to be done, as three out of five adults have yet to wake up to the tax efficiency of pensions, and women are clearly lagging behind men in the awareness stakes. But it’s good to know that understanding is on the increase. More people are likely to think about investing tax efficiently for their future if they realise that for every £4 a basic rate tax payer invests in a pension plan, the taxman adds another £1.*

“The launch of automatic enrolment into company pension schemes could well have driven some of this increased awareness over the past year. And with many more employees being automatically enrolled into a company pension in 2013, I expect awareness to continue to grow. But our research has also found that it is those who are investing actively in a personal pension who are more likely to be switched on to the tax efficiency of investing in a pension than those in a workplace scheme. 57% of people with a personal pension are aware, compared to 47% of those actively investing in a workplace pension.”

 

All figures, unless otherwise stated, are from YouGov Plc.  Total sample size was 2059 adults. Fieldwork was undertaken between 25 – 28 January 2013.  The survey was carried out online. The figures have been weighted and are representative of all UK adults (aged 18+).

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