Avoiding tax is generally thought of as the preserve of the rich - those who are wealthy enough to employ an army of accountants and tax planners, and jet off to a tax haven for half the year. However, this is far from the case. All of us could save a small fortune on our tax bills if we took advantage of one simple rule.

In fact, between us we could save £2.5 billion.

Pensions

The rule in question is that at the moment we don't have to pay tax on any part of our income that gets salted away in a pension scheme. In reality this tends to mean you are paid your salary with the tax taken off, and if you pop it straight into a pension, George Osborne and his friends will top it up by adding the taxed amount back on.

If you pay a basic rate of tax, you will have 20% added on, and if you pay the higher rates you will have either 40% or 50% - depending on what you pay. In practice, this means that for every £100 you want to save, you only need to contribute £80 of your own money (and £60 for a higher rate tax payer and £50 for an additional rate tax payer respectively).

The generosity of the system means there are huge sums of money we could be taking advantage of.

Missing out

The latest figures from unbiased.co.uk's Tax Action report reveal that 4 million Brits who are currently not paying into a pension but say they are likely to consider doing so, are currently leaving £2.5 billion of income tax relief on pension contributions unused.

The latest HMRC figures reveal the average pension contribution made by individuals per year is £3,010. Research shows that employees could be boosting their pension pot by as much as £602 each and £2.5 billion collectively by taking advantage of tax relief on pension contributions, and this is just for basic rate payers. Higher rate taxpayers could benefit from saving into a pension potentially adding up to £1,204 in tax relief.

Karen Barrett, Chief Executive of unbiased.co.uk, comments: "Saving into a pension can be one of the most tax efficient methods of saving for retirement, however people rarely think about the tax benefits. Tax relief on pension contributions is free money available to you, helping you to boost your retirement pot."

Drawbacks

Of course, it's worth being upfront about the drawbacks. First and foremost, this cash has to go into a pension, which needs to be locked away until retirement. Danny Cox, an adviser with IFA Hargreaves Lansdown says: "The fact that people aren't saving may have less to do with the fact they are not aware of the tax breaks, and more to do with the fact they have other spending priorities, and where they are saving they may be putting money aside for more short-term needs."

Second, in most cases your pension will end up being used to produce an income, which is taxed. However, this may well be a price worth paying, because it means your money has a chance to grow in a tax-free environment; you will also have the chance to take out 25% tax-free on retirement, and you may be paying a lower rate of tax by then anyway.

Cox says that on balance, pensions should still be a key part of everyone's priorities. He says: "The tax breaks are compelling. If you can free up some money to save for retirement and you consider your options, then the vast majority of people should have pensions somewhere in the mix - especially if they have access to a corporate scheme where their employer pays money in too."

He adds that while tax breaks may not be the reason we aren't saving into a pension, perhaps they ought to be the reason why we should start doing so as soon as possible.