The latest research by Unbiased reveals that around a million individuals are missing out on tax relief by failing to maximise their pension contributions. The report indicates that higher rate tax earners are missing out on an extra £720 million tax relief a year just by failing to make additional pension contributions into their company’s pension scheme. They estimate that as many as 78% of the 1.4 million high earners are not making additional contributions to their pension.

However, there is only a limited window of opportunity for high earners to take advantage of this tax relief. At the recent Budget report 2009 Alistair Darling, Chancellor of the Exchequer, announced the governments intention to limit pension tax relief for those earning over £150,000 from 2011. This will mean that a significant number of high rate tax payers will not only not be entitled to 40% tax relief on pension contributions, but have to also pay tax on their companies contributions.

To make matter worse, according to a growing number of reports the amount individuals are investing for the future has dramatically decreased due to the current economic environment. For example, Unbiased estimate that in Q1’09 Britain’s savings levels have hit an all time low of £14 billion since the survey started nine years ago. By contrast, the amount of new debt rose to £2.7 billion in the same period. At the current rate Britain is currently borrowing 19p for every pound saved.

With public debt at an all time high and an ever increasing ageing population it has become more important than ever to plan for ones retirement as reliance on state provision may soon be a thing of the past.