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A study released this week by InvestEngine has highlighted a significant gap in retirement savings, showing that over 2.3 million higher and additional rate taxpayers are not claiming the
tax relief they're entitled to on pension contributions. This demographic — individuals earning £50,271 or more — represents 56 per cent of workers who contribute to personal pensions
like self-invested personal pensions (SIPP), with a worrying 46 per cent admitting they don't claim their due tax relief. As a result, savers could diminish their pension pot by as much
as £350,000 over 40 years if they contribute £400 monthly without claiming tax relief. Additionally, the study points out how staggering fees can be: just a 1 per cent annual fee can slash
a portfolio's value by almost a quarter over four decades, while a 2 per cent fee can devour 41 per cent of it, reports Birmingham Live. Consequently, the double whammy of unclaimed tax
relief and management fees may halve a potential £1.6 million pension pot to under £800,000. Andrew Prosser from InvestEngine has called attention to these findings, noting that although
people are saving "good sums" for their future, many are simultaneously losing substantial amounts by neglecting to reclaim eligible tax relief. In illustrative terms, a
higher-rate taxpayer stashing away £400 each month for their pension across 40 years would accumulate £192,000, with an added government contribution of 20 per cent amounting to £48,000 over
the same period due to automatic tax relief—a total boost of £1,200 annually. He stated: "Over time, this could reduce pension pots by hundreds of thousands of pounds. Those paying the
higher tax rate and contributing to a personal pension should ensure they are claiming back all eligible tax from HMRC while checking their pension provider's fees to see whether they
could be getting a better deal elsewhere."