Awareness of pension tax efficiency is on the rise

More people are aware of the tax efficiencies around pensions than a year ago, according to research by Standard Life.

Its research, which surveyed more than 2,000 UK adults, found that more than a third (39%) respondents are aware that the government will automatically add £1 for every £4 they invest in a pension if they are a basic-rate taxpayer,for the 2013/14 tax year.

The research also found that almost half (47%) of respondents who actively invest in a workplace pension scheme are aware of this tax efficiency.

In 2012, only 29% UK adults said they knew of this tax efficiency around pension contributions.

Increased awareness has almost doubled among 18-to-24 year olds. One in five (20%) of this age group now know about the tax efficiency of saving into a pension, compared to 11% a year ago. Overall, those aged between 45 and 54 were the most likely to be aware, at 46%.

However, there continues to be a gender bias. Almost half (48%) of men are aware of the incentives for investing in a pension, while 70% of women are unaware.

Julie Russell, head of customer relationships at Standard Life (pictured), 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, because 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 [for the 2013/14 tax year].

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“The launch of automatic-enrolment into [workplace] 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 those investing actively in a personal pension are more likely to be switched on to the tax efficiency of investing in a pension than those in a workplace scheme.”