Savers rush to top-up pensions ahead of predicted annual allowance cut

Zurich saw savers invest double the 12 month average on its platform last month and the value of one-off pension contributions also jumped 161% as savers invested larger amounts.

The provider believes that consumer uncertainty over pensions is actually costing the Treasury more in tax relief as savers up their contributions over fears perks will be axed.

It added that although any reduction in the annual allowance would be targeted at wealthy savers, self-employed workers will suffer the most.

In a statement last week, Zurich said the cut would affect self-employed workers who often make one-off contributions or significant payments nearing retirement.

Alistair Wilson, Zurich’s head of retail platform strategy, said: “Savers are making the most of the higher pension savings cap while they still can. Investors are clearly worried that the Government could slash the savings limit in the upcoming budget and are rushing to top-up their pots.

“The amount of money flowing into pensions doubled last month – even outstripping peaks seen ahead of tax-year end. Many savers are also paying in more than the current £40,000 annual limit to take advantage of unused allowances from previous years before it’s too late.

“There’s been a sharp increase in pension contributions since speculation began over a potentially lower savings cap. Far from reducing the cost of tax relief, the Government’s continued tinkering with pensions is pushing the bill up.

“The Chancellor should end the uncertainty for savers and give them the confidence and stability they need to make long-term plans for their retirement.

“Not everyone pays into a pension in the same way. Self-employed workers often have to choose whether to contribute to a pension or invest in their business. This means they may only be able to make ad hoc contributions as they go or larger payments nearing retirement.

“Britain’s growing population of self-employed workers already misses out on benefits such as auto-enrolment, making it harder for them to save for retirement. Restricting the amount they can save would penalise them further.

“To soften the blow of any lower annual allowance, the Chancellor should consider increasing the number of years people can carry forward unused allowances, or introducing an age-related allowance that rises as consumers near retirement.”