Quarter of higher rate taxpayers lack pension

Nearly one in four higher rate taxpayers is failing to save into a pension scheme, according to research from the insurer Prudential. This is despite the fact that such people enjoy more favourable relief on their pensions contributions than those who pay the basic 20 per cent rate.

The study of those earning between £42,275 and £149,999 found 21 per cent claimed they cannot afford to contribute to a pension scheme. One in eight (13 per cent) do not see the point of saving for retirement, despite the tax benefits, while 17 per cent don't know why they fail to save into a pension scheme.

"Turning down what is effectively free money simply does not make sense," said Matthew Stephens, Prudential's tax expert. "It is worrying so many higher rate taxpayers say they cannot afford a pension despite earning healthy salaries."

From October, employees who are not members of a workplace pension scheme will start to be auto-enrolled into the government-sponsored Nest scheme.

Lack of pension saving is a much greater problem among basic rate taxpayers. It has been estimated by the Government that up to 12 million workers are currently failing to save anything at all into a pension.