One in 10 workers in the UK have stopped saving into their pensions or have cut their contributions in the wake of the coronavirus crisis, according to new analysis.
Since the lockdown began in March, millions of UK workers have suffered income cuts after being furloughed, and worry they could lose their jobs as the Covid-19 crisis deepens.
New research has shown that 11 per cent of workers have responded to pandemic pressures by pulling back on payments into their pension funds, with just as many saying they are revising their future retirement plans.
According to analysis by Aviva, one of the UK’s largest pension providers, five per cent of adults had stopped paying into their pensions since March, and a further 6 per cent had reduced their pension contributions.
The survey of 2,000 respondents also found that one in 10 workers aged between 45 and 55 were redrawing their retirement plans.
“The ongoing Covid-19 pandemic has caused financial difficulties for many, and for thousands of middle-aged people retirement plans are likely to be put on hold,” said Alistair McQueen, head of savings and retirement at Aviva.
“Employees today are already working longer than generations before them, but as savings plans are likely to take a hit due to sweeping changes to circumstances, many now face the possibility of having to work for longer to enable their finances to catch up.”
The Department for Work and Pensions said: “We recognise that these are currently challenging times for many, but it’s important that people continue to take a long-term view on their pension and, if they can, save towards the retirement they want.”
The Pensions Regulator said it was working with the DWP and “closely monitoring the payment of contributions and opt-outs to gain a clear picture of how both employers and staff are responding to the challenges, to ensure automatic enrolment continues to be a success”.
The Aviva survey, conducted in May by Censuswide, the pollsters, comes a week after a parliamentary select committee recommended that the Pensions Regulator should consider nudging employees who opt-out of workplace retirement schemes during the pandemic to opt back in again sooner than the current rules set out.
Workers who are automatically enrolled into a company pension make contributions of at least 5 per cent of pensionable salary, but also receive a minimum 3 per cent contribution from their employer, plus tax relief on what they pay in, at their marginal rate.
An employee can currently temporarily opt out of a workplace pension and opt back in at a time that is right for them.
If they don’t rejoin the company scheme after three years, the employer is required by law to re-enrol eligible employees.
“The Covid-19 pandemic has placed huge strain on household incomes and it is inevitable some people struggling to make ends meet will have felt it necessary to opt-out of their workplace pension,” said Tom Selby, senior analyst at AJ Bell.
“It is crucial these people are nudged back into saving for retirement as soon as possible.”
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