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18% plan to drip feed pension cash into an ISA
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One in five (19%) investors have shunned pensions completely, in favour of stocks and shares ISAs
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The Share Centre sees ISA inflows increase 9.2% year on year since the pension freedoms
The insight into how individuals are planning to take advantage of the pension freedoms – which removed the requirement to purchase an annuity – is revealed ahead of the Chancellor’s next Budget, where he has stepped down from a proposal to tax pensions like ISAs. This would have involved taxing contributions rather than withdrawals.
The research of over 1,500 people also found that 19% of investors are already choosing a stocks and shares ISA to fund retirement over a private pension. This indicates that consumers are yearning for increased flexibility and access to their long-term savings.
Since pension freedoms gave retirees the opportunity to access cash tied up in a pension, as opposed to purchasing an annuity, The Share Centre has seen an increase of 9.2% in ISA inflows year on year.
Richard Stone, Chief Executive of The Share Centre, commented: “Pension changes and tax overhauls can seem incredibly daunting, but people clearly favour the flexibility an ISA can offer. When it comes to the apparent U-turn on the ‘pensions ISA’, it’s easy to see why it attracted criticism, with many viewing it as yet another complicated change to retirement policy. But with auto-enrolment now being made mandatory across the UK, there is less need for personal pensions as a savings vehicle.
“Whatever happens, what’s more important than anything is ensuring that the incentive to save for the long-term is protected, and people don’t shy away from it. This is particularly true when it comes to investing: people can be scared off altogether. However, adopting a ‘little and often’ approach is a very achievable strategy, and drip-feeding into an investment can help reduce exposure to volatility whilst also benefiting from the returns: The stock market has returned over 600% since 1990, compared to just 68% by cash, which is hard to ignore. Whether it’s locking money away for the future in a pension or turning to stocks and shares, retirement saving can’t be seen as an afterthought.”
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