Pensions - Articles - Are Britons back in the pension saving habit?


 Personal pension saving has returned to near record levels, with a 7.8% rise in contributions to personal pensions in 2011/12, analysis by investment platform provider AJ Bell shows.

 More than £15.9bn* was paid into private and workplace pension schemes in the last tax year, some £1.24bn more than the 2010/11 total, according to new government figures.

 The amount is the second highest on record, beaten only in 2007/08, when £16.35bn was saved into personal pensions.

 Personal pension contributions have also risen above stocks and shares ISAs again after last year saw stocks and shares ISA subscriptions out-stripping personal pension contributions for the first time in ten years.

 Billy Mackay, AJ Bell Marketing Director, said the increase in pension saving was probably in part linked to people making use of special rules known as carry forward. These were introduced by the Coalition Government in its 2010 emergency Budget, in which the annual tax-relieved pension contribution limit was reduced from £255,000 to £50,000. Carry forward allows people affected by the restriction to use up any remaining pension contribution allowance from the three preceding years.

 Says Mackay: "It's likely the increase in pension contributions is down to people using carry forward. Our own experience suggests we might see a further increase in pension contributions this year as people look to invest prior to the drop in the top tax rate from 50% to 45% next tax year, particularly with a further cut in the annual allowance to £40,000 a little over a year away."

 The HMRC data (see table below) also shows a year-on-year drop in cash ISA subscriptions - the first time his has happened, according to official records. However, there was an increase in stocks and shares ISA subscriptions.

 Adds Mackay: "I think there's an element of people becoming more confident in stock markets again - or perhaps disillusioned with low interest rates. People might be putting more into pensions and stocks and shares ISAs because they believe they should get a better return than they will from a cash ISA."

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