The majority (56 per cent) of high-net worth individuals (HNWI) are not maximising the extra £20,000 pension annual allowance available to them after recent increases, research from Saltus Wealth has revealed.

Saltus Wealth’s Index Report showed that HNWIs are not making the most of the increased allowance, despite 42 per cent suggesting that they planning to take advantage of the new limit when it was increased in April 2023.

The research, which surveyed 2,000 people with investable assets of over £250,000, showed that 27 per cent of HNWIs are contributing above the previous annual allowance, adding between £40,000 and £50,000 into their pension this year, but just under one in ten (8 per cent) are contributing up to the maximum £60,000.

According to the survey, the average pension contribution for HNWIs was £35,400, up only £1,600 from April 2023 where average contributions, prior to increase in annual allowance, were £33,800.

This resulted in an average pension pot for HNWIs of £483,571, which Saltus pointed out is more than £50,000 short of the £535,979 pot necessary to provide their desired level of income.

What’s more, the research showed that this ‘shortfall’ is even larger for those nearing retirement (respondents aged 55 and over), at more than £115,000.

Saltus highlighted these latest findings as evidence that cost-of-living pressures are having an impact on HNWIs, with 13 per cent admitting to reducing their pension contributions as a direct result of rising costs.

In addition to this, 10 per cent of those with adult children, and 15 per cent of those with adult grandchildren, said they have reduced their own pension contributions specifically to fund financial support for younger generations.

Saltus chartered financial planner, Gianpaolo Mantini, suggested that, as a relatively new change, the underutilisation of the increased pension allowance could be due to a lack of awareness, explaining that "if people don’t know that its available, they may be sticking to the same approach for their pension that they have used for years".

More broadly, however, Mantini suggested that it could also be linked to lower levels of disposable incomes following mortgage interest rates and other inflationary pressures,

"Business owners particularly have been conscious of increased wage demand and pressures on their profitability and so are retaining additional cash to weather the current economic climate – and subsequently not topping up their pensions," Mantini continued.

"Looking at the next 12 months, there are also concerns about which elements of the recent pension changes Labour may look to reverse if they win the next election.”

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