Every year I come across people that fail to claim all the tax relief they are due on pension contributions. Here is what you need to be aware of:
Do you pay 40% or 50% tax. Yes? Read on.
Do you have a workplace pension? Yes...
Do you make a contribution? (% of pay or fixed amount)
Do you know what type of pension you have?
Assuming you are now armed with that information:
If you have a final salary/defined benefit pension, you?re OK (that's teachers, nurses, doc's, public sector workers and those lucky people in companies that still run final salary schemes all sorted!)
Everyone else, you need to know if you have what is known as a Group personal pension (GPP), a 'Stakeholder pension', a 'personal pension', OR an Occupational Pension (sometimes called an Occupational Money Purchase Scheme). All of these are 'work' pensions but they operate very differently.
If you have an Occupational pension, stand down, rest easy, you're sorted! (For anyone that's interested this type of pension has what is called a 'Net pay arrangement' to sort the tax, but really you can stop reading now)
Everyone else it's worth checking you've done this.
If you have a GPP (Stakeholder or Personal Pension) it is your responsibility to tell HMRC that you are making payments via your salary and claim your full tax relief. If you don't complete a tax return you are NOT getting relief at your highest rate UNLESS you have informed them of your contributions and your tax code was adjusted, or you write to them every year. This is nothing to do with your employer and they will not have done it for you. By default you are receiving basic rate tax relief on your contributions (your pension fund claims that for you, called relief at source), but YOU need to claim the balance (20% or 30%) from HMRC.
Also, if you do fill in a tax return, when it asks if you have a personal pension, the answer is YES (if you have a GPP, SH or PP) ! ! ! People think that as their pension is via work that it is not 'personal' and again they fail to claim their tax relief.
Lots of people have now been sucked into the higher tax band and self assessment is not always sent out. It's self help on this one ladies so hopefully someone finds this a useful heads up.
Just as a point of interest, Gift Aid works in the same way. If you are giving to charity and are in the 40/50 bands then again you can claim the additional relief. Maybe not worth doing a self assessment for unless donations are substantial, but worth being aware of this!