The first quarter of this year has seen pensions overtake Isas on platforms, according to a new report by Fundscape, a UK fund research house.
In spite of volatile markets seen at the start of the year, and just 1 per cent stock market growth within Q1, platform assets under management grew by 3 per cent to £415bn. Gross platform sales totalled £21.2bn in the same time period, down 7 per cent on Q1 in 2015.
Table 1 shows the sales for Isas, pensions (including Sipps), defined contribution and workplace pensions and other forms of investments for Q1. It is clear that while there is more money in Isas than pensions, gross sales into pensions were more than double that of Isas, and net sales were more than four times greater – £5.6bn into pensions, £1.3bn into Isas.
“This doesn’t surprise me at all and reflects our experience where Isa sales were flat on the previous year but pension business was significantly up,” Jason Hollands, managing director of business development and communications at Tilney Bestinvest said. “Much of this is likely to be one-off in nature, however, as there were widespread expectations ahead of the Budget that the chancellor would abolish higher-rate tax relief on pensions altogether. This encouraged higher- and additional-rate tax payers to maximise contributions in the first quarter, including the use of carry forward to mop up unused allowances from the three previous years.”
Jeremy Edwards, partner at Leicestershire advisers Martin-Redman Partners, said the pension freedoms have not had an effect on client views. “Many clients do not register the implications of the pension freedoms outside of an ability to take all funds as a cash lump sum. The more subtle changes have passed them by and often the tax implications have not been seen. Often the most valuable thing we do for clients is to educate them.”
Greg Heath, managing director at Derbyshire Booth Financial Management in Lancashire, said the public are getting the message via the media that the pension freedoms are not just about treating pension funds as a flexible bank account. “It is about tax relief. Any pension contribution is uplifted by 20 per cent, 40 per cent or even 45 per cent depending on your marginal tax rate. Where else do you get growth like that?”
He added, “Pensions now offer the opportunity for pension funds to pass down the generations from spouse to spouse, to children and then grandchildren and possibly great grandchildren in a tax- privileged environment free from inheritance tax and probate rules.”
