Contributions to self invested personal pensions (Sipps) have risen during the coronavirus pandemic as savers have used their disposable income to boost their pensions.
Figures from Interactive Investor, published this morning (November 4), showed among 30-39 year olds there was a 35 per cent increase in the average value of Sipp contributions between January and October 2020, compared with the same period last year.
In comparison, 40-49 year olds saw the value of contributions increase by 18 per cent but the rise among those nearing retirement age (50-55) was smaller, at 7 per cent.
However, the youngest and oldest age groups bucked the trend as they contributed slightly less this year, with a fall of 0.3 per cent for those aged 18 to 29 and a fall of 3.6 per cent for those between 56 and 65 years old.
Becky O’Connor, head of pensions and savings at Interactive Investor, said: “It’s positive to see these younger investors not afraid to up their investments and take advantage of lower stock prices after the initial crash. Whereas older groups, from this data, appear to have been more cautious.”
Darren Cooke, chartered financial planner at Red Circle Financial Planning, said he would advise clients to put extra savings into pension pots.
He said: “For me it has pretty much been business as normal with regards pension contributions for clients.
“I can't think anyone has significantly increased or reduced their payments this year over last year.
“Where clients have spare funds or income they don't need today or in the foreseeable future I would generally advise them to make a pension contribution.”
But Alan Chan, director and chartered financial planner at IFS Wealth and Pensions, said putting more money away may not be advisable for all clients unless it is not needed for their short term requirements.
Mr Chan said: “Interest rates are at an all-time low and the rumours are doing the rounds again that the generous tax relief for higher rate and additional rate tax payers could disappear.
“It’s not a trend that we’ve noticed and, actually quite the contrary, as employment is unstable and for small business owners their business prospects may be unclear.
“With another lockdown imminent, I can understand if clients choose to temporarily retain their savings even if they are earning very little just to give them that greater peace of mind and security until things stabilise a bit more.”
Boost in saving
According to analysis of Office for National Statistics data, households are on track to save £748.70 over the course of the next month-long lockdown, with the biggest savings to be made from travelling less and not eating out.
In addition, Bank of England money and credit data showed a large rise in savings deposits during April to June, when lockdown measures were at their toughest.
Although the amount saved dropped in the summer months, it had started to pick up again in September.