It was reported at the end of February 2012 by the Office of National Statistics (ONS) that contribution input to ISAs (Individual Savings Accounts) outstripped contributions to pensions in the tax year 2010/2011 ( the last tax year) for the first time. With around £15.8bn going into ISAs and (only) £14.2bn going into pensions (excluding stakeholder plans) the margin was quite significant at this crossover point.
Why this tax efficient savings preference change has happened could be for a number of reasons, with many citing the ever growing complexities of pension rules and the relatively simple (but less tax efficient) ISA rules, which allow accessibility to the capital invested. With many family budgets squeezed in the last few years, it may be this flexibility which has increased the desirability of this savings option.
It is also clear that with the introduction of changes to allowances for pension contributions, such as the Lifetime Allowance (falling from £1.8m to £1.5m next tax year), Fixed Protection, the annual allowance limit of £50,000 in a Pension Input Period / PIP, amongst others, the planned 'simplification' of pensions in 2006 has not been achieved. Also, with pension Auto-Enrolment for many employers and employees on the imminent horizon, an additional set of requirements will be introduced. Further details of these issues are detailed in our webpage ‘National Employers Savings Trust/ Auto-Enrolment/Workplace Pensions’ here.
It is good to see the annual contribution allowance limit climbing for ISAs rising from the current limit of £10,680 in this tax year (£5,340 into Cash ISA/ £5,340 into Stocks & Shares ISA) to £11,280 in the coming tax year (2012/2013). Further benefit has also been seen by recent rises in fixed rate ISA deposit terms provided by some providers, as they endeavour to maintain market share in this busy sector. Also, with recent rises in many equity markets, some have seen encouraging rises in their capital values.
Past performance is not a reliable indicator of future performance and fund values can fall as well as rise.
If you would like to consider your savings, investment and pension planning further then please contact Chapters Financial Limited through this website or by telephone on 01483 578800. No individual advice has been provided in the text of this Blog and you should seek individual advice for your own circumstances.
Chapters Financial Limited is Authorised and Regulated by the Financial Services Authority. Number 402899
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