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Wealthy investors shun private pensions

Wealthy investors shun private pensions

Category: ISAs

Updated: 02/02/2016
First Published: 02/02/2016

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

Saving for the future is something we all need to get into the habit of, but the question is, how are you going about it? For many people, a pension will be the first port of call, but others will turn to alternative investments such as ISAs, too – and it seems that the wealthiest investors are shunning private pensions altogether.

The research, from The Share Centre, found that 24% of wealthy investors (those with more than £10,000 in investments) are replacing their private pensions in favour of stocks & shares ISAs, arguably in order to benefit from a greater level of flexibility.

ISAs allow investors to access their money if necessary, and their popularity has only grown since the implementation of the pension freedoms last year – the Centre has since seen an 11% increase in ISA inflows year-on-year, a trend that's been driven by retirees gaining access to their pension fund and reinvesting the money, giving them a greater level of control.

"We may be seeing the beginning of the death of the private pension," said Richard Stone, chief executive of The Share Centre. "The pension freedoms have got investors thinking about the flexibility they want from their long-term savings vehicles, and the fact that a quarter of wealthy investors are looking at ISAs, and ISAs alone, to finance their future speaks volumes about what investors want from their investment products."

Richard added that, while the taxable benefits of a pension "cannot be argued with, many may now be viewing their workplace pension as the only pension vehicle they need in their life".

The implementation of auto-enrolment means that a growing number of workers are already saving for their future, and the upcoming changes to the tax system (such as the caps on pension contributions and a reduction in the lifetime allowance) means that saving any more than necessary into a pension could become a false economy.

As a result, it's unsurprising that ISAs are becoming the long term savings vehicle of choice – they give investors the chance to accumulate a tax-free savings pot, and when using multiple years' allowances, the fund could easily add up. So, while a workplace pension is still an absolute must, it seems that many are turning their backs on additional pension pots in favour of the flexibility and tax efficiency that ISAs can bring.

What next?

Stocks & shares ISAs come with additional risks and so won't be for everyone – find out more about them here

Compare cash ISAs as an alternative

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