October 19, 2020 8:56:56 AM
One in four pension savers have stopped or reduced their contributions since the coronavirus crisis started in order to make ends meet, a survey has found.
Men and younger workers aged 18 to 34 are particularly likely to have cut back, according to the findings published by Hargreaves Lansdown.
Across the survey, 11% of people had stopped their pension contributions and a further 14% had reduced them – making a total of one in four (25%) who had cut back.
A further 8% plan to stop paying in or cut their contributions in future – indicating that, looking ahead, around one in three (33%) people may end up stopping or reducing their pension contributions.
One in seven (13%) men had stopped paying into their pension and 16% of men had made reductions to their contributions.
Among women, 9% had stopped paying in and 11% had reduced their contributions.
In the 18 to 34-year-old age group, 12% of people had stopped paying in and 20% had reduced their contributions.
Sarah Coles, personal finance analyst at Hargreaves Lansdown, said: “Covid has ravaged pension contributions for one in four people.
“Men and young people are more likely to have cut payments during the past few months. In many cases, this is because they were far more likely to have been furloughed than women and older workers.
“Younger people may also be quicker to stop contributions because their pension feels like a more distant consideration, so an easy cost to cut.
“However, it’s worth doing what you can to keep paying into your pension throughout your career. The money you put in when you’re younger works the hardest for you, so this will come at a higher cost than you expect.
“If you cut back, the impact will also be magnified, because you lose the Government top-up too. If you’re paying into a workplace scheme, you’re triggering payments from your employer – so you’ll lose this free money into the bargain.
People who decide to opt out of their workplace pension are automatically put back in after three years, Ms Coles added, “so even if you don’t get round to kick-starting payments yourself, you’re likely to accidentally do the right thing”.
She said that there may be cases where cutting back on pension saving is the only option, where finances are stretched and someone is struggling to pay bills and has already cut out discretionary spending and shopped around to cut the cost of essentials to the bone.
Ms Coles said some solace can be taken from people choosing to lower their pension contributions rather than stopping them altogether.
This is a good indication that people remain committed to saving something for their future, even during the toughest times, she added.
More then 2,000 people were surveyed by Opinium at the start of October.