SIPP contributions tripled in February amid Budget concerns
Self-invested Personal Pension (SIPP) contributions more than tripled in February compared with the previous year, figures from Fidelity International revealed.
While the end of the tax year usually sees a rise in pension contributions, concerns around the upcoming Budget saw savers making the most of their pension benefits with SIPP contributions rising 203% in comparison to last year.
Total individual SIPP contributions doubled in February versus the previous month, with 41% of this increase seen in the last week of the month alone, the data showed.
A SIPP or a DIY pension allows individuals to choose, access and manage wider investments than those offered within a stakeholder pension platform.
Fidelity said the spike showed savers are concerned over announcements made by the Chancellor in the run up to the Budget including the possibility of scrapping pension tax relief.
Despite the U-turn on this so-called Pension ISA idea, Fidelity said people should look to maximise their benefits now.
Changes coming in from April 2016
This is because from 6 April there are a number of changes planned, including the fall in the Lifetime Allowance from £1.25m to £1m, which means a decrease in the maximum amount you can hold in pension savings without facing a tax bill.
Higher earners with an annual salary of £150,000, with taxable benefits and pension contributions will also be hit with a reduction in the annual allowance. This means the amount you can contribute to your pension and still enjoy tax relief will reduce from £40,000 until it reaches just £10,000 if your income is £210,000 or higher.
The final change savers need to be aware of is the end to the ‘carry-forward’ rule on 5 April for people who have unused allowance from the 2012/13 tax year.
Under the ‘carry forward’ rules, savers can go back three tax years and use up any unused allowance. So if you hadn’t used up your whole allowance in the 2012/13 tax year – when the annual allowance was £50,000 (rather than the current £40,000), you were able to ‘carry forward’ any unused allowance to this tax year.
Maike Currie, investment director for personal investing at Fidelity International, said: “It’s perfectly normal to see a spike in pension contributions as we near the end of the tax year but this year’s pension flows reveal that this trend has been brought forward. While George Osborne’s U-turn has taken away some of the urgency to maximise pension contributions before the Budget, this is a timely wake-up call for savers. The Chancellor has indicated pension tax-perks are in his sights – this is a postponement and not a cancellation of change.”