Hargreaves Lansdown data shows higher earners are taking advantage of the changes in the pensions tax allowances, which has seen people save 18% more into their HL SIPPs in the 2023-2024 tax year to the end of December, when compared to the previous year (April-December).
The investment platform also reports a 53% increase in the number of people contributing more than £60,000 (the current annual allowance) via carry forward, with the number contributing more than £40,000 grew three-fold.
This behaviour the firm attributes as a response to the increases in annual and tapered allowances and abolition of the lifetime allowance announced in last year’s Budget, with the deadline to use allowances this tax year is 5 April.
Commenting on the increased figures, Jack Williams, head of pensions and retirement, Hargreaves Lansdown says: “Higher earners have piled back into pensions as they take advantage of the new higher allowances to boost their SIPPs and maximise their tax relief. The number of our clients contributing more than £40,000 has tripled, and the number using carry forward to invest more than £60,000 has jumped by 50%. It’s clear the rule changes have breathed fresh life into pension planning.
“High earners should also consider using pension contribution allowances across their family. You can add £2,880 to a SIPP each year for a non-earner, including non-working spouses and children, and the government will automatically pay £720 as tax relief. This is a valuable, but often underused, tax-saving opportunity.
“In last year’s Budget the government also 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 find they need to re-enter the workforce after having previously retired. There’s strong signs this measure is working with the number of people contributing exactly £10,000 to their SIPP so far this tax year over 50% higher than those who contributed exactly £4,000 in the same period last year.”
