New figures reveal that higher earners in the UK are leaving substantial sums of money on the table each year by not claiming the full pension tax relief available to them. For individuals earning over £50,270, hundreds of millions in unclaimed tax relief are going unclaimed annually – money that could directly boost retirement savings. This is according to pensions specialist, Penfold.
Pension contributions are one of the most tax-efficient ways to save for retirement. Basic-rate taxpayers automatically receive 20% tax relief on contributions, but higher-rate (40%) and additional-rate (45%) taxpayers must claim the remainder themselves. Many simply don’t, missing out on hundreds or even thousands of pounds in potential relief.
When you contribute to a pension, the government refunds the income tax paid on that contribution, up to the annual allowance of £60,000 or 100% of your earnings. For basic-rate taxpayers, this happens automatically:
- Contribute £80
- Government adds £20
- £100 goes into your pension pot
For higher-rate taxpayers, the automatic 20% addition only covers part of the relief. The remaining tax relief must be claimed directly from HMRC.
Potential Savings Example
Sam, who earns £53,000, wants to contribute £5,000 to her pension:
- Automatic 20% relief adds £1,000
- Additional higher-rate relief of £546 can be claimed
- Total pension benefit: £5,000 for a net cost of £3,454
For those earning £55,270 or more, full 40% relief applies, reducing the cost of a £5,000 contribution to just £3,000.
Chris Eastwood, CEO and co-founder of Penfold, stated, “As of 2025, HMRC has introduced a streamlined online service, replacing the older, slower manual claims process. Taxpayers can now claim higher-rate or additional-rate relief via the HMRC online service or through their Self-Assessment tax return. Eligible individuals can even backdate claims for up to four previous tax years.
“Most workplace pensions automatically apply tax relief at your highest rate, depending on contribution arrangements such as net pay, relief at source, or salary sacrifice. Where this does not happen, employees can still claim extra relief themselves.”
Whether you’re owed £50 or £5,000, pension tax relief represents a powerful opportunity to grow retirement savings while reducing your tax bill today. Platforms like Penfold provide the records needed to make claiming fast and simple.
For more information or to claim your pension tax relief visit HMRC’s online pension tax relief service or contact your pension provider.