One in 10 mass-affluent employees have stopped paying into their workplace pension in the last 12 months, with a further 7 per cent “temporarily” pausing contributions, according to new research.
This survey indicates the effect that rising living costs are having, even on those on above-average salaries, with the research conducted among consumers earning at least £39,000, and with a minimum of £1,000 in accessible cash or savings.
The research, by wealth manager Raymond Jones, also found that 10 per cent had reduced the amount they paid into their workplace pension – meaning almost a third of this cohort had stopped or reduced payments.
However, it found a similar proportion (29 per cent) had increased the amount they contribute to their workplace pension in the last 12 months, with 7 per cent paying in a lump sum to boost their pension.
The research looked into the reasons why people have stopped or reduced their workplace pension contributions, with 20 per cent saying it was to free up cash to help with rising living costs.
Meanwhile 18 per cent said this money was being diverted to build their emergency savings pot. A total of 11 per cent said they stopped, paused, or reduced their pension contributions to take a break from work, such as a sabbatical or for a break between jobs, while the same number (11 per cent ) did so to have children. A further10 per cent did so as a result of the Middle East conflict on their investments.
Other reasons cited include included to go travelling (15 per cent), wanting to focus more on savings rather than investing (15 per cent), or to pay off their mortgage (12 per cent). Respondents were able to select more than one reason.
Research by the Department of Work and Pensions looking at auto-enrolment contribution rates has shown a slight increase in the number of people opting out of AE in recent years, as cost of living pressures have increased.
Raymond James director of financial planning Harry Bell says: “Pensions are one of the most important and effective tools for securing financial stability in later life. But with more than one in six either completely or temporarily stopping their workplace pension contributions in the last year alone, this raises major red flags. Even more so for those currently in full time employment.
“Pensions provide a structured way to build a long-term retirement fund, being tax-efficient and benefiting from the results of compounding and additional boosts from employers. But making survival-based financial decisions, which may seem sensible in the near-term with retirement feeling a long way off, can have long-lasting consequences.”
