The value of tax benefits handed out on pension contributions grew only marginally in the past year, according to government figures.
The value of tax benefits on contributions to pension schemes was £25.6bn in 2018/19, a mere 5 per cent higher than the £24.3bn in the year before.
This means growth slowed 12 percentage points from the 17 per cent observed between 2014/15 and 2015/16, according to analysis of HM Revenue & Customs data by financial adviser Salisbury House Wealth.
The slowdown in tax benefits on pension contributions was likely to have been driven by reductions to the annual allowance, which is the amount that can be contributed to a pension tax free every year, from £80,000 to £40,000 over the last five years.
According to the data, which covers the period up to March 31, the overall tax benefits gained on savings and investments in the UK hit £30.2bn last year, up 5 per cent from £28.8bn the year before.
However, the rate of growth of those tax benefits has slowed in recent years after the government restricted the amount of benefits on pensions and also cut the benefits on investment products such as the Enterprise Investment Scheme (EIS).
Tax benefits on investments through EISs fell 8 per cent in 2018/19 to £600m, down from £650m, while tax incentives on venture capital trusts (VCTs) fell 22 per cent last year to £175m, down from £225m.
Rules introduced in 2017 mean providers of VCTs and EIS-qualifying investments must focus purely on growth investments which meet more stringent criteria.
These rules may have affected the amount invested through these different options, stated Salisbury House Wealth.
Tax benefits granted on investments had grown 10 per cent per year over the previous three years.
Salisbury House Wealth said individuals should seek to get access to tax benefits on investments while they are still available to help maximise overall returns from their retirement savings.
Tim Holmes, managing director at Salisbury House Wealth, said: “There are tax benefits up for grabs for individuals which should not be ignored.
“Effectively using these benefits can really add enormous value when saving for retirement.”
He added: “The Government wants individuals to save more but it is also being put under pressure to meet budget constraints. Tax benefits available are likely to suffer as result.
“Tax benefits can be really useful but they should not control how an individual invests, as they may be inappropriate for their risk appetite or the kind of returns being targeted.
“The important thing is follow a strategy that will meet your investment objectives and obtaining the right financial advice can be crucial in achieving this.”
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