Are you inadvertently leaving money on the table when you contribute to your pension? A recent “Supplementary forecast information release” from the Office for Budget Responsibility (OBR) regarding the future of National Insurance and salary sacrifice may sound like a cure for insomnia, but it contains a startling revelation for high earners.
Hidden beneath a cocktail of jargon and economic modelling is a clear assumption: the government is banking on you failing to claim the tax relief you are legally owed.
The “Relief at Source” Trap
To understand why this is happening, we have to look at Relief at Source (RAS) schemes. These include most personal pensions and many popular workplace schemes like NEST.
Under the RAS system, your contributions are made net of basic rate tax, regardless of your actual tax bracket. For example, if you want to make a £100 gross contribution, you pay £80 from your pocket, and the pension provider automatically claims the remaining £20 from the government.
This works perfectly for basic-rate taxpayers, but for those in higher brackets, it only tells half the story.
The Higher-Rate Claim Gap
If you pay tax at 40% (or 45%), you are entitled to further relief, but it is not automatic. You must actively claim the balance from HMRC, usually via a Self Assessment tax return or by contacting them to adjust your tax code.
Using that same £100 example:
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A higher-rate taxpayer is entitled to a total of £40 in relief.
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The pension provider gets the first £20 automatically.
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You must claim the remaining £20 (or £22 if you are a Scottish higher-rate taxpayer).
The OBR report assumes that at least 10% of higher and additional-rate relief goes unclaimed. In reality, recent data suggests the problem could be even larger, with hundreds of thousands of taxpayers missing out due to “fiscal drag”—where frozen thresholds pull more people into higher tax brackets without them realizing their new claiming responsibilities.
Why the Treasury Benefits
The OBR estimates that this “unclaimed relief” will lead to a permanent increase in government receipts of roughly £0.2 billion by 2030/31. Essentially, the complexity of the system acts as a “stealth tax” on those who aren’t proactive with their paperwork. If you’ve been dragged into the 40% tax bracket recently, you might be one of those unwittingly helping the Chancellor.
Reclaim Your Relief with Chartwell
Don’t let your hard-earned money stay with the Treasury. At Chartwell Wealth Management, we help our clients ensure their pension contributions are structured as efficiently as possible, helping you identify and claim every penny of relief you are entitled to.
If you think you might be missing out on tax relief, or if you’re concerned about how your tax bracket affects your retirement savings, contact us today. Our expert advisors can review your current arrangements and help you secure your financial future.
Important Information: The value of your investment and any income from it can go down as well as up and you may not get back the full amount you invested. Tax treatment varies according to individual circumstances and is subject to change. The Financial Conduct Authority does not regulate tax advice.
