Farmers in their 50s and 60s could be missing out on thousands of pounds by continuing to prioritise ISAs over investing in pensions, according to NFU Mutual.
The warning by the rural insurer comes as latest figures show that 3.8 million people aged between 55 and 64 have ISAs worth an average of £38,257.
While money can normally be taken from ISAs at any time, flexible pension rules mean investors can access pensions from 55 years old (57 from 2028), taking the money as lump sums if they wish.
And the impact of pension tax relief means returns could be boosted by up to 41.6% for higher rate taxpayers, NFU Mutual says.
Sean McCann, chartered financial planner at the insurer, said many of farmers could be better off topping up their pension and claiming the tax relief.
“Once you reach 55 you can take money from your pension either as lump sums, income or both," he explained.
"This means they can offer an attractive alternative to ISAs if you’re looking to build up funds for the future or to potentially pass on wealth free of inheritance tax.
“In the rural community, we know a lot of farmers won’t have an employer paying into a pension scheme, so saving early and utilising pension benefits is a good idea, no matter your age.
“The tax boost you get when you put money into a pension can make a huge difference to returns.”
Higher rate taxpayer example
• Over 55, earning £60,500 a year and with £6,000 to invest
• As a 40% income tax payer, £8,000 could be invested into a pension – HMRC would then boost with a further £2,000 giving them a fund of £10,000.
• Up to an additional £2,000 can then be claimed back direct from HMRC, meaning cost to them to create a £10,000 fund would be £6,000
• Assumes no growth and no charges
