Total employer pension contributions fell 5 per cent between Q4 2020 and Q1 2021 driven by a 27 per cent decrease in deficit reduction contributions.
The quarterly Financial Survey of Pension Schemes from the Office for National Statistics (ONS) also found there was a 2 per cent increase in the number of people paying into their workplace pensions. The survey also showed that total employee contributions rose 12 per cent while DB hybrid and DC employer contributions increased by 11 per cent.
Money.co.uk senior personal finance expert James Andrews says: “Today’s findings show that pension contributions have been massively affected by COVID-19, just like many aspects of our day to day lives. But it’s also good to see people paying in where they can – with more people paying into a workplace pension and a rise in total contributions too.
“And it’s money well spent in most cases – with early pension contributions having longer to grow. Workplace pensions are also topped up by bosses, seeing workers earning more than £10,000 a year offered at least an extra 3 per cent of their salary to pay into a pension as long as they pay in 5 per cent themselves.”
Employees also have the option to open up a self invested personal pension which wouldn’t allow for an employer top up but would allow for a tax break on the first £40,000 saved a year until the first fund withdrawal.
Andrews says: “When opting for a self-invested personal pension, you pick a company to invest in, choose which funds or assets you want to invest in and how much to put in each one, and then manage the pension online. You are responsible for the performance of your pension when you invest in a Self Invested Personal Pension, so take the time to study each fund before you start investing.
“All direct contribution pensions carry an element of risk, due to them being investments, but a self invested personal pension could be considered a greater risk due to the fact the decisions are all up to you, as opposed to a fund manager or similar professional. However, it is worth remembering that a pension is a long term investment and as such the higher rewards associated with shares and investments may outweigh short term losses.”