Consumer interest for pensions in 2022 reached record highs, Standard Life discovered.
The word ‘pension’ was searched online a total of 654,000 times last year – up 16% from the previous 12 months and a 40% year-on-year increase.
February is usually the busiest month of the year for pension searches, but in 2022, the biggest spike occurred in October with 74,000 searches alone, likely caused by Kwasi Kwarteng’s ‘mini-budget’ at the end of September 2022.
Interest remained high for the rest of Q4 2022, Standard Life found, with a total of 195,000 searched for the last three months of the year – compared with 123,100 in Q4 2021.
Jenny Holt, managing director for customer savings and investments at Standard Life, said: “Our analysis shows there’s been a 16% increase in online searches for pensions over the last year, with people looking for information about their finances during a turbulent economic environment. The 74,000 searches recorded during October’s spike were likely compounded by the mini-Budget, the impact of which drove national attention to defined benefit pensions in particular.
“The late surge of state pension searches may have been boosted by the chancellor’s confirmation that the triple lock will produce the largest ever increase to state pensions this April.
“In recent years, February has been the busiest month for pension searches and it will be interesting to see whether this proves to be the case this year. With tax year end approaching, many people chose February as a time to consider their savings and make use of their allowances ahead of the April deadline. We anticipate 2023 is likely to put pensions in the spotlight once again, as people look to make the most of their savings in a challenging climate.”
Tax changes
In other news, Steven Cameron, pensions director at Aegon, believes there currently are three pension tax rules that are hindering over-55s from working.
Since economic inactivity for people over the age of 50 is worryingly on the rise, Cameron believes the government should change some of the rules to support the older cohort to return to work.
He said: “The lifetime allowance (LTA) is the maximum individuals can build up in their pension without facing a tax penalty. After being cut back severely a few years ago, it now sits at £1.073m ($1.3m, €1.2m) and has been frozen at that level until 2026.
“With skyrocketing inflation, this means it is worth less year on year. While it may seem high, more individuals who would not class themselves as wealthy are finding they have reached the limit. This is most likely if they have a generous final salary pension, which are now mainly in the public sector. It is one reason some highly paid doctors have left the workforce. We would like the chancellor to make an immediate increase in the limit to say £1.5m and to reinstate inflation-linked increases thereafter. This would remove the threat of tax penalties arising from further employment and added pension rights.
“Another limit is the annual allowance which limits pension contributions from the individual and their employer to £40,000 a year or earnings if less. Again, this may seem high but some individuals in defined benefit (DB) pensions may find the value of an extra year of pension benefit is valued at above this, particularly if they receive a significant pay increase for example on a promotion. The government might allow more flexibility than currently exists before levying tax penalties.
“Many individuals over 55 who have taken income ‘flexibly’ from their money purchase pension may not realise that by doing so, they become subject to the little known money purchase annual allowance (MPAA). They may have done so because they have stopped work or to tide them over during the pandemic or the current cost of living crisis.
Unfortunately, it means the most they and their employer can pay into a pension in future, including if they return to work, is just £4,000 a year. This means many are unable to take advantage of full pension entitlements and won’t be able to rebuild their pension pot for a later retirement. An increase to £10,000 would make it far less likely that individuals would be affected here.
“If the chancellor truly wants to send a message to over-55s who have left the workforce that ‘your country needs you’, then pensions tax rules need to be updated to reflect today’s world of work. While this might mean a little less tax is collected, it could generate much more if encouraging more employment participation.”
