Budget rumours have sparked a record number of tops up across SIPPs and ISAs, say Hargreaves Lansdown.
The number of people making contributions into the Hargreaves Lansdown SIPP between 6 April and 31 October this year is up 7%.
Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, said: “With rumours of a potential shift to a flat rate of tax relief swirling, we are seeing those with a bit of spare cash taking the no-regrets move to bolster their retirement position by bringing forward contributions now.
“A shift to a flat rate of tax relief of say 30% would see a £100 pension contribution cost a higher rate taxpayer £70, rather than £60. For an additional rate taxpayer, the same contribution currently only costs them £55. It’s a massive incentive to save for your future.”
The investment platform also reported a sharp rise in ISA contributions amid rumours over possible changes to ISA rules. There has been a 123% increase in clients making contributions to cash ISAs only so far this tax year and a 91% rise in clients making contributions to stocks and shares and cash ISAs.
Meanwhile, stocks and shares ISAs have also seen a 14% increase in clients making contributions, while there has been a 38% increase across Junior ISAs.
Sarah Coles, head of personal finance at Hargreaves Lansdown, said: “Rumours about potential capital gains tax rises will have encouraged people into stocks and shares ISAs, which are completely free of CGT, both when you sell up and cash out and whenever you rebalance your portfolio. ISAs also protect investments from dividend tax, which hasn’t attracted much Budget speculation, but remains a key factor thanks to recent cuts in the annual allowance.
“The fact that so many HL clients are combining stocks and shares ISAs with cash ISAs demonstrates the enormous value of being able to find the right balance for your circumstances every tax year without complexity or friction. It underlines how important it is that any potential changes being considered don’t accidentally make this more difficult.”
Hargreaves Lansdown’s data also showed an 8% increase in clients making contributions to lifetime ISAs so far this tax year.
Coles added: “Some buyers may be putting their plans on hold to see what the Budget holds in store, but those who are still building their deposit aren’t hanging around in the race to get onto the property ladder.
“There will also be those who are putting money away for retirement, who see the LISA as a useful way to ensure tax-efficiency of retirement savings outside a pension too. Budget speculation may have provided a handy reminder of just how valuable the LISA bonus is, so they’re keen to take advantage where they can. The rising popularity of the Lifetime ISA demonstrates that in the face of questions from MPs, clients are voting with their feet and harnessing the power of the Lifetime ISA to build their nest eggs.”
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