Pension savings hit record high

PENSION savings hit a record high last year as more people are putting aside money for old age than ever before.

Personal contributions worth £24.6billion were paid into pots – up from £24.3billion in the previous 12 months, official figures showed.

The cost of tax relief offered by the Treasury to savers also increased to £38.6billion from £38.5billion.

And yesterday pension experts warned Chancellor Philip Hammond, whose Spring Statement is due this month, not to cut the discounts offered and therefore the incentive to save.

Former pensions minister Steve Webb said: “Successive chancellors have viewed pension tax relief as a honey pot, convenient to dip into whenever they are short of money.

“But pensions should be a long-term business, and six cuts in the last seven years simply undermines confidence in the system. It’s time the Chancellor committed to no more changes to tax relief for the rest of this Parliament.”

Pressure on the cost of pension tax relief includes more people saving through automatic enrolment.

Millions of workers are now autoenrolled into a workplace scheme with many making savings for the first time. The amount of tax relief granted on contributions has increased over the past 10 years by 25 per cent to £38,600million. However, the increase in receipts on pensions have shot up by 43 per cent to £13,500million.

Tom Selby, senior analyst at AJ Bell, said: “Pulling the tax relief rug from under the system now would be a huge risk and could potentially undermine the entire reform programme.”

Treasury figures also highlight how little the self-employed are saving for retirement. Contributions have fallen from £1,300million in 2007-08 to £700million in 2016-17, despite a rise in self-employment.