pensions and retirement

Savers rushing to top-up pensions amid budget tinkering fears



Posted on: 25th October 2018

Savers are in a rush to top-up pensions amid fears chancellor Philip Hammond will deliver another cut to the annual allowance in this month’s Budget. This is according Zurich. September has seen a dramatic rise in cash flowing into pensions on Zurich’s investment platform. In fact, these cash flows have soared 98 per cent in comparison to the annual average, the firm has found.

A dramatic rise in top-up pensions

There has also been a dramatic increase in the value of one-off pensions. The value has jumped 161 per cent from the 12-month average as savers have invested much larger amounts. The provider says it cannot reveal the monetary value of the extra amounts being put on the investment platform, due to the information being commercially sensitive. However, what they do point out is that savers have invested double the average in September.

Alistair Wilson, head of retail platform strategy at Zurich, says that savers are making the most of the higher pension savings cap while it is still possible. He also says they are worried the government could slash the savings limit in the Budget next Monday.

Budget predictions

There is recurring speculation before each Budget whether the government will change tax relief. Former pensions minister, Ros Altmann, argues that the Treasury will stay away from any radical change amid the uncertainty of Brexit. However, Wilson adds that savers are in a rush to top-up pensions and are paying in more than the current £40,000 annual limit. This is so that they can take advantage of unused allowances from previous years before the opportunity is gone for good.

Any reduction in the annual allowance will be targeted at wealthy savers. Despite this, Wilson says that self-employed workers are likely to take the biggest hit. He adds that not everyone pays the same way. Self-employed workers must usually choose whether they should contribute to a pension or invest in their own business.

This means that they may only have the ability to make ad hoc contributions as they go or make larger payments near retirement. As a result, restricting the amount they can save in any year would further penalise them.

Wilson says: “To soften the blow of any lower annual allowance, the chancellor should consider increasing the number of years people can carry forward unused allowances or introducing an age-related allowance that rises as consumers near retirement.”

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