A 12 months on for the reason that improve within the pensions’ annual allowance, the vast majority of HNWIs (56%) should not utilising the additional £20,000 allowance out there to them, new information from the Saltus Wealth Index Report has revealed.
The analysis additionally revealed that pension pots of these nearing retirement are at present greater than £100,000 in need of the place they need to be to fulfill the earnings they need in retirement.
In April 2023, the annual allowance – the quantity it can save you right into a pension pot every year earlier than paying tax – elevated from £40,000 to £60,000.
Some 42% of HNWIs mentioned then they deliberate to contribute the complete £60,000, however solely a 3rd have contributed greater than £40,000 and simply 8% greater than £50,000.
Elements akin to the price of dwelling disaster and supporting relations, have meant pension contributions should not being prioritised. 13% of respondents mentioned they have been lowering pension contributions as a direct results of rising prices. In the meantime 10% of these with grownup youngsters (and 15% of these with grownup grandchildren) mentioned they’ve decreased their very own pension contributions particularly to fund monetary assist for youthful generations.
Practically a 3rd of HNWIs (27%) mentioned they’re contributing above the earlier annual allowance – including between £40,000 and £50,000 into their pension this 12 months – but solely 8% are contributing as much as the utmost £60,000.
The common pension contribution for HNWIs is £35,400, up solely £1,600 from April 2023 the place common contributions (prior to extend in annual allowance) have been £33,800.
Moreover, the analysis exhibits the common pension pot of HNWIs is £483,571 – greater than £50,000 in need of the £535,979 pot that may be obligatory to supply their desired degree of earnings. For these nearing retirement (respondents aged 55+) the shortfall is even bigger, at greater than £115,000.
Gianpaolo Mantini, Chartered Monetary Planner at Saltus, mentioned: “When the rise to the pensions’ annual allowance contribution got here into impact this time final 12 months, it’s one thing we’d have anticipated to see most HNWIs benefiting from. Nevertheless, they aren’t.
“As a comparatively new change, I believe the underutilisation may very well be on account of a lack of expertise concerning the elevated allowance, and if folks don’t know that it’s out there, they might be sticking to the identical strategy for his or her pension that they’ve used for years.”
• The survey included 2,000 UK respondents (aged 18+) who’ve £250k+ of investable belongings. Analysis was performed by Censuswide. The analysis was carried out on-line in December 2023.