Only one in 10 advisers think the 2p cut in national insurance will lead to a pensions savings boost, research has revealed.
The research, conducted by M&G Wealth, found advisers did not expect the tax cut, which is worth on average £450 per year, to be invested in long-term pensions savings.
According to M&G the reduction, set to come into effect in April this year, would mean lower NI savings for basic rate taxpayers making use of salary sacrifice arrangements but should improve their financial position overall.
However, 83 per cent of advisers do not think this extra money generated from the cut will be used to invest in pensions, with another piece of research from M&G Wealth finding 51 per cent of Brits felt financially worse off going into 2024 than they did at the start of 2023.
Les Cameron, pensions and tax expert at M&G Wealth, said: “The measures announced in the Budget will put more money in the pockets of the working population and give people more options when it comes to saving for their future.
“However, our research shows the cost-of-living crisis is taking its toll on people’s financial well-being. This poll shows advisers have their finger on the pulse, with many expecting their clients to use the extra cash to boost their spending rather than saving power.”
Advisers were more positive on the impact of the newly announced British Isa and increased tax-free allowance, with two-thirds expecting it to lead to further savings.
Cameron added: “The proposed introduction of the British Isa increases choice for savers but also adds further complexity. The majority of Isa savers subscribe less than £15,000, so the increase in the annual limit is likely to be most attractive to those in the £100,000 plus income bracket who are most likely to maximum-fund their Isas.
“For those looking to invest solely in the UK, the British Isa could prove a valuable addition to their investment portfolio as the wrapper of choice for UK investments, alongside other tax wrappers being used to invest in other regions.”
This comes after pensions director at Aegon, Steven Cameron said the narrow target market of the British Isa could raise challenges under consumer duty.
Cameron said: "Even for individuals ‘maxing out’ their stocks and shares Isas, there are questions over the appropriateness of increasing exposure to UK equities rather than a more geographically diversified portfolio.
"The consumer duty requires advisers to avoid causing foreseeable harm which will prompt consideration of past and anticipated future relative performance.
“Given the narrow target market, the British Isa looks like a very niche product."
alina.khan@ft.com
