A failure to save in a tax-efficient manner is likely to cost Britons hundreds of millions of pounds this year, it has been claimed.

 

Research conducted by unbiased.co.uk suggests members of employer occupational pension schemes who pay the higher rate of income tax will lose £742 million in tax relief in 2010 alone.

 

This is as a result of a failure to make Additional Voluntary Contributions (AVC), which have the advantage of being taxed at the same rate as contributions made to the main pension scheme .

 

As a result, savers can reduce their tax burden by diverting income which would have been taxed at the higher rate into their pension pot.

 

That said, Karen Barrett, chief executive of unbiased.co.uk, noted that savings for retirement seems to have slipped down consumers' priority lists in the wake of the global economic downturn.

 

Failing to save for retirement has become an increasing problem for the UK population, she confirmed.

 

The financial meltdown experienced over the last two years further compounded this problem, as the value of people's pension funds has decreased.

 

Last month, Keith Barton, chairman of the Association of Consulting Actuaries, criticised the Liberal Democrat call for the higher rate tax relief on pension contributions to be removed.

 

He called for Nick Clegg to think twice about the effectiveness of the approach and its wider impact.