ISAs overtake pension
For the first time since 2001/2, Britons saved more into stocks and shares ISAs than personal pensions last tax year.
Figures from the Office for National Statistics released today showed that £14.28bn was saved into personal pensions (excluding stakeholder) in the 2010/11 tax year compared to £15.837bn saved into stocks and shares ISAs in the same tax year.
This compares with £12.542 billion being subscribed to stocks and shares ISAs and £14.42 billion contributed to personal pensions in 2009/10.
"The figures are a clear endorsement of the success of ISAs, which are simple and easily understood, and show how dangerous complexity can be for pension saving," said Billy Mackay, Marketing Director of low cost investment platform provider A J Bell. "This is a ticking time bomb for the UK. The Government needs to do everything possible to make pensions attractive and simple."
Part of the reason for the decline in pension saving was the complexity of legislation introduced by the last Government to limit pension saving.
Mackay added: "Economic and political uncertainty won't have helped - people concerned about tomorrow's income won't tie savings up in pensions when they are concerned that the Government will tinker with the rules before they are able to draw their pension.
In April 2011 the Coalition simplified the rules governing pension contributions and dramatically lowered (from £255,000 to £50,000) the tax relieved amount that can be paid into a pension each year. The last fortnight has seen renewed speculation that the Chancellor will axe pension tax relief altogether for higher rate tax payers or may cut pension contribution limits even further.
Mackay said: "These figures show that pension saving had already been falling even before the Government limited the amount that can be saved into a pension from the start of the current tax year. Introducing further restrictions in next month's Budget would have a hugely negative impact on the confidence of pension savers.
"The lesson we learn from the success of ISAs is that the public likes simple products; a consistent set of rules; and confidence that the product will not be the target of continuous Government attacks. If the Government wants pension saving to be successful it must embrace those principles."