Fear of Budget crackdown drives enormous surge in savers topping up pensions and Isas

Speculation about what the Budget might hold for savers has triggered a big rush to top up or max out Isas and pensions early this year.

The number of clients using up their entire £20,000 Isa allowance already is up 40 per cent on last year, according to Hargreaves Lansdown.

The investing platform, which offers both stocks and shares and cash Isas, also reports a 20 per cent rise in customers making at least some contribution to their Isa, when we are still just over midway through the tax year.

The number of well-off savers maxing out their £60,000 annual pension contribution has also shot up by around two thirds, while 12 per cent more than last year have chosen to top up their pots early, says the firm.

The annual allowance is the standard amount you can put in your pension every year and qualify for tax relief on what you saved.

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‘The Budget has inspired a record-breaking six months for saving and investing, as people have been reminded just how valuable their Isa and pension allowances are, and rush to make the most of them while they know where they stand,’ says Sarah Coles, head of personal finance at Hargreaves.

‘It’s the biggest year ever for the number of people paying into their Self-Invested Personal Pensions (Sipps), Junior Isas and Lifetime Isas, and the second biggest for Isas – after the pandemic peak in 2022.’

Hargreaves says there has been a 51 per cent rise in people using up a child’s full £9,000 Junior Isa annual allowance since the start of the tax year, and a 31 per cent jump in those making any kind of contribution.

It also notes a 19 per cent jump in those contributing exactly £3,600 to their pensions, the maximum a non-working spouse or child can contribute, indicating families are bolstering pensions across the board.

The number of its clients taking advantage of the full £4,000 a year Lifetime Isa limit has risen 28 per cent, while the amount sticking in at least some cash by this point in the year is up 21 per cent.

Hargreaves lays out some of the concerns that have driven savers to boost their pensions and Isas before the Budget below:

– Speculation about a move to a flat rate of tax relief, which would favour basic rate taxpayers but work against higher or additional rate payers – although the Chancellor has reportedly cooled on this idea.

– The prospect of income tax thresholds staying frozen for longer, which makes pension contributions look more advantageous.

– Rumours about potential capital gains tax rises, which has driven the popularity of Bed & Isa arrangements, where you sell investments held outside an Isa and buy them back inside a new or existing one.

– Potential tweaks to Isa allowances, including a lifetime cap.

– The chance of an inheritance tax overhaul which could see tougher rules such as an extension of the seven year rule – after which gifts over the £3,000 annual allowance become tax free – to 10 years.