Due to the cost-of-living crisis, one in 10 adults have stopped – or are planning to stop – pension contributions. Around 5% of UK adults have stopped paying towards their company’s pension plan to save money as inflation continues to rise, with it now standing at 9.4%.
Figures from the Office for National Statistics (ONS) show the number of people who had a pension rose each year from 2012 until 2020, which is the first year to show numbers plateauing.
In 2012, ONS show five in 10 signed up to a pension plan, but since then automatic enrolment of pensions requires people to opt-out of company pensions. This has meant that by 2020 eight in 10 were signed up to pension contributions. However, this upward trend seems to be slowing down with many now opting to back out of these contributions.
In addition to this, according to a recent survey commissioned by Canada Life, a further 6% of workers are planning to pause their pension contributions, whilst another 9% are considering following suit.
However, Canada Life warned of the negative effect this could have for workers pensions. They found that a worker on £50,000 a year chose to stop paying 8% towards their pension contributions, for just one year, could lead to a 4% fall in their final pension.
Andrew Tully, technical director at Canada Life, stated:
“It’s understandable that people feeling the pinch are considering opting out. Affording food and heating will take priority over saving. However, it’s important to remember to re-join a scheme as their financial situation improves.”
Ultimately, with the Bank of England on the 4th of August confirming that inflation is expected to rise further, the cost of living crisis and workers’ finances are only set to worsen, leaving some families with little choice but to back out of pension contributions.
