More than one in five Britons have cut their pension contributions or stopped paying in altogether as the cost of living crisis forces households to make difficult decisions, according to a study.
The research coincides with the head of one of Britain’s biggest fund managers, Abrdn, calling for a doubling of minimum pension contributions for millions of workers in order to avert a “very real” retirement incomes crisis.
With real wages falling and bills rising sharply, millions of people have been looking for ways to reduce spending and boost their incomes, with some concluding that they cannot afford to save for retirement at the moment.
According to a UK survey by the investment platform Hargreaves Lansdown, 22% of people have either stopped (14%) or cut back (8%) on pension contributions during the cost of living crisis.
Men were more likely to have done this than women, the firm said.
Younger people are more likely to have cut, or stopped, their contributions than older people. Almost a third of the 18-34 age group had done this, compared with one in five 35- to 54-year-olds.
The insurer Scottish Widows has said its research indicated that 35% of people were not on track for even a minimum retirement lifestyle, as defined by one of the main pension bodies, which meant they were at risk of struggling to afford basics such as food and heating when they were older.
Helen Morrissey, the head of retirement analysis at Hargreaves Lansdown, said: “Rising prices have made balancing budgets a real struggle, and it’s no surprise that, after making all the cuts they can elsewhere, people are turning their attention to their pensions.”
While it made sense that people who were struggling were prioritising the here and now, it was vital that they resumed their pension contributions as soon as they were able to, she added.
For the past decade, the UK’s “auto-enrolment” regime has required all employers automatically to enrol eligible workers into a workplace pension, which the worker and employer pay into. Under auto-enrolment, at least 8% of the worker’s pay goes into their pension pot, made up of 3% from the employer, 4% from the employee and 1% tax relief from the government.
However, Stephen Bird, the Abrdn chief executive, warned that the minimum 8% of salary figure was not “anywhere near enough”.
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He said: “To have any chance of achieving decent retirement outcomes, the contribution rate needs to double – taking it closer to the levels seen in other developed economies.
“There is a very real crisis brewing for millions of individuals in the coming decades in terms of an inadequate income in retirement.”
The TUC has previously said some workers were going a step further and opting out of workplace pension schemes entirely because they cannot afford the payments. Experts say this is almost always a bad idea as it means people are missing out on free money from their employer and investment growth.
