Pensions - Articles - If pensions annual allowance cut then ISA limit should rise

  This would mean the maximum people could save into a tax incentivised savings vehicle would remain unchanged at £60k (1) and send the message that the Government remains supportive of people saving for their future.

 Steven Cameron, Pensions Director at Aegon said: “Currently, the maximum people can save into a pension each year is £40k (1), compared to £20k into an ISA. Both pensions and ISAs offer savers important tax incentives including tax free investment growth. However, unlike ISAs, the incentives for pensions are added ‘upfront’ costing the Government money today through paying a ‘tax relief’ bonus on contributions. Income tax is due on three quarters of income once taken from pensions, but this may be decades into the future, far beyond the Chancellor’s budgeting time horizon. With ISAs, there’s no government bonus added to contributions, so while all ISA proceeds are tax free, there’s no cost to the Government today.

 “Now more than ever, people need to take personal responsibility for their financial futures so it’s important the Government incentivises this. We hope the Chancellor resists any further reduction in how much people can save each year into a pension, particularly given reports of an improvement in public finance projections. However, if he does make a reduction, the very least he should do is make an equivalent increase to the ISA contribution limits. For example, £40k to pension and £20k to ISA could become £30k to each. This would mean the total people can save annually into a tax incentivised savings vehicle remains unchanged at £60k.”