One thing to do this month... get the right pension tax relief

Each year 250,000 higher-rate taxpayers fail to claim 40% tax relief on their pensions, receiving only 20% relief instead, according to Standard Life.

Find out if you're getting the tax relief you're entitled to with the Moneywise guide.

• The way you get tax relief on an occupational pension varies. Most employers take the contributions from your pay before tax is deducted, so you get the right relief straightaway.

However, some employers use the same method that personal pension schemes use.

• Tax relief with personal pensions works differently because your contributions have already been taxed.

Providers claim back tax from the government at the basic rate of 20%, so if you're a higher-rate taxpayer, you need to claim the extra 20% either through a tax return or by contacting your tax office.

• If you're not self-employed and don't fill out a tax return anyway, a letter will suffice.

Tell the tax office how much you've paid into your pension that year and notify it of your tax band. It will then change your code and tax liability accordingly.

• You can reclaim relief dating back four years. Someone on £70,000 a year, paying 10% into a pension, would lose £1,400 each year from their pension fund if they failed to claim back the extra.

Act now to benefit from retirement tax break

Pension savers who want to contribute more than £50,000 tax-free to their pot in the coming months must do so before April 2011, following changes implemented by the Treasury.

Currently, £255,000 can be contributed in any tax year, with a lifetime allowance of £1.8 million. From April these will be reduced to £50,000 and £1.5 million.

The government says the measures are aimed at those making the most pension savings, as only 100,000 people contribute more than £50,000 a year, and an estimated 80% of those have incomes over £100,000.

The concern is that those with long service in final salary schemes who receive a pay rise and those nearing retirement who try to bump up their pension could face unexpected tax bills.

But the government plans to let individuals who exceed the annual allowance due to a one-off spike in contributions to offset this against unused allowances from the previous three years.

Watch out!

As if the struggle facing pension savers isn't tough enough, Moneywise has noticed some providers are not showing the charges racked up on pension funds in their annual statements.

While they give a breakdown of the contributions from you and your employer, the fees and charges are either hard to find or not included at all. If you notice this is the case, contact your provider and demand an explanation.

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