SIPPs boom as people save 18% more
People saved 18% more into their Hargreaves Lansdown SIPPs in the current tax year up to the end of December when compared to the previous year (April-December).
High earners piled into pensions because of the annual allowance boost and abolition of the lifetime allowance, the investment platform provider said.
HL’s data revealed a 53% increase in the number of people contributing more than £60,000 (the current annual allowance) while the number contributing more than £40,000 grew three-fold.
It said people changed their behaviour in response to changes announced in last year’s Budget, specifically the increases in annual and tapered allowances and the lifetime allowance abolition.
Jack Williams, head of pensions and retirement, Hargreaves Lansdown, said: “It’s clear the rule changes have breathed fresh life into pension planning.”
The deadline to use allowances this tax year is 5 April and he advised high earners to consider using pension contribution allowances across their family. People can add £2,880 to a SIPP each year for a non-earner, including non-working spouses and children and the government will automatically top this up with £720 of tax relief.
In last year’s Budget the government took steps to help people who have already flexibly accessed their pension to rebuild it by increasing the money purchase annual allowance from £4,000 to £10,000 per year.
It was a measure designed to help those who either had to access their pension early to top up their income, as well as those who found they needed to re-enter the workforce after having previously retired.
Mr Williams said: “There are strong signs the measure is working with the number of people contributing exactly £10,000 to their SIPP so far this tax year more than 50% higher than those who contributed exactly £4,000 in the same period last year.”
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