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Savers rush to top-up pensions as Budget threat of lower cap looms

October 23, 2018

  • Savers invested double the average on Zurich’s platform last month
  • Size of one-off pension contributions also increased 161%
  • Zurich warns slashing the annual allowance would unfairly impact Britain’s self-employed workers

Savers are rushing to top-up their pensions amid fears the Chancellor will deliver a further cut to the annual allowance in this month’s Budget, according to leading pension provider Zurich.

Cash flowing into pensions on Zurich’s investment platform soared 98% in September compared to the annual average.

The value of one-off pension contributions also jumped 161% from the 12 month average as savers invested larger amounts.

Alistair WilsonAlistair Wilson, Zurich’s Head of Retail Platform Strategy, (pictured right) said, “Savers are making the most of the higher pension savings cap while they still can. Investors are clearly worried that the Government could slash the savings limit in the upcoming budget and are rushing to top-up their pots.  

“The amount of money flowing into pensions doubled last month – even outstripping peaks seen ahead of tax-year end.  

“Many savers are also paying in more than the current £40,000 annual limit to take advantage of unused allowances from previous years before it’s too late.”

Wilson said that consumer uncertainty over pensions is costing the Treasury more in tax relief as savers up their contributions over fears perks will be axed. 

“There’s been a sharp increase in pension contributions since speculation began over a potentially lower savings cap.  Far from reducing the cost of tax relief, the Government’s continued tinkering with pensions is pushing the bill up,” he said.

“The Chancellor should end the uncertainty for savers and give them the confidence and stability they need to make long-term plans for their retirement.”

Although any reduction in the annual allowance would be targeted at wealthy savers, Wilson said that self-employed workers will suffer the most.

“Not everyone pays into a pension in the same way.  Self-employed workers often have to choose whether to contribute to a pension or invest in their business.  This means they may only be able to make ad hoc contributions as they go or larger payments nearing retirement,” he said.

“Britain’s growing population of self-employed workers already misses out on benefits such as auto-enrolment, making it harder for them to save for retirement.  Restricting the amount they can save would penalise them further.

“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.”