Women and young workers unaware of pension tax relief

Women and young workers remain woefully in the dark about the tax benefits of saving into a pension, a study has found, despite increasing awareness of the issue as a whole across the UK.

Just two in five adults are aware that tax relief on pension contributions sees the Government add £1 for every £4 saved by basic rate rate taxpayers, research for Standard Life has revealed.

Just 30 per cent of women are aware of this benefit - compared to just under half of men - while just 20 per cent of under 25s of working age are well-versed on tax relief.

Top up: Tax relief incentivises pension saving and helps members build up bigger pots come retirement.

This is an improvement on figures from last year's study - when just 29 per cent of UK adults were aware of tax relief - but it still represents a huge gap in workers' knowledge at a time when millions of employees are being automatically enrolled into pensions for the first time.

Standard Life's Julie Russell said: 'There's still work to be done, as three out of five adults have yet to wake up to the tax efficiency of pensions.

'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.'

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As well as basic rate taxpayers receiving 20 per cent tax relief on their contributions, those on the 40 or 45 per cent tax rate will receive the same amount in tax relief on their contributions. If higher rate taxpayers are in a workplace pension this will be done automatically, but those saving into personal pensions need to reply for a rebate on their tax returns or by contacting HMRC.

It's not just in contributions that pensions are tax-friendly, as savers are able to take 25 per cent of their total pension fund as a tax-free lump sum from the age of 55 onwards.

Unsurprisingly, those closer to retirement - aged between 45 and 54 -  are the most in the know about tax relief, although this is still low at 46 per cent.

Unaware: Women are more likely to be in the dark about the benefits of tax relief on pensions.

The gender bias is stark meanwhile, with 48 per cent of men are aware of the tax incentives, compared to just 30 per cent of woman.

There is also a discrepancy between those saving into personal pensions and those savings into workplace pensions, with 57 per cent of personal pension holders aware of tax relief benefits, presumably because they take a much more active role in their pension saving.

Julie Russell added: '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...rather than those in a workplace scheme.'